The Formation and Regulation of Monopolies
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- Опубликовано: 3 окт 2024
- We've all played the board game monopoly. Perhaps surprisingly, this is a pretty good introduction regarding the concept of a monopoly in economics. This is a situation when a single seller dominates a market. How do monopolies come about? How are they regulated? Do governments create them, or bust them apart, or both? And under what circumstances? Let's find out!
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Animation by Ignacio Triana: / unraveled
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How do monopolies form? Monopolies form because the government blocks competition through regulations and laws.
I never understood why so many people act like that is the end all be all reason for why monopolies persist. It's not clear at all to me that this would prevent what apparently seems to be the root cause: that companies keep merging with their competitors.
Governments also often create monopsonies. For example, in Canada, you're not allowed to buy certain healthcare services from anyone but a government-paid supplier.
You’re reading the footnotes. Capitalism necessarily creates monopolies with or without govt intervention
@@stevencats7137 explain that false statement
@@ultrad27 in competition there are winners and losers. When a loser loses, do the customers say “man guess I can’t buy soap anymore”??? No, they go buy soap from the winner. Sometimes a new guy comes in, sometimes the winner loses a little, but when you win once it is fundamentally easier to win again, and again. You have more money for advertising, R&D, etc. the natural tendency is for capital to then accumulate with the winners. This isn’t my opinion, this is an objective fact..
@@ultrad27 no comment?
The US Military is an effective monopsony for the domestic weapons market
Very well made video. I guess I never thought about governments creating the monopolies themselves, very interesting.
The Netherlands used to have several monopolies for public services: the railway company, local energy companies, postal service. They worked well, though not perfectly. All were created by government. Due to neoliberal policies imperfect markets have been created. Overall they haven't improved the services. Pretty strict regulations have made sure they didn't worsen too much either.
It's funny I've never thought of public services as monopolies, although they were. They were very good in my country too. The market making stuff better for the end consumer thanks to competition often seems an illusion of capitalism.
Ah yes, this will definitely help me gain a monopoly on knowledge.
Especially since I have such a good supplier.
knowledge tycoon
Great video! Not only are you incredibly good at explaining scientific concepts, but economic concepts aswell.
In a less ideal situation, states can create monopolies not for the public good, but only for the benefit of the elites of this very state
Great video nonetheless
The US is definitely in one of those 'less than ideal' situations. Look at how the bottom 80% of wealth only gets their vote 1/5 of the time.
Whenever I hear monopoly, I think of ticket master
Luxottica is a perfect example, it owns the rights to all the fancy sunglasses,
ray bans are that expensive because luxottica says so, never mind that the materials used can be found in a pair of glasses costing $20,
That is not a monopoly. That is marketing fashion. Competitors exist, some are at least a stylish. Heck there are people that buy products that are selling little more than their name splattered all over it as if that was style.
@@ethelredhardrede1838 not really,
they own almost all the brands,
seriously, YT has a lot of videos on this company,
@Nicholas Time
80 percent is not a monopoly in the US. It has to be higher. The real question is, do they engage monopolistic business practices as Microsoft used to do. Or Standard Oil which was way worse than MS ever was.
@@ethelredhardrede1838 Yes, they do engage in monopolistic practices, why do you think they own 80% of the market? It was probably higher before sites like Warby Parker and Glasses USA existed.
@@lainiwakura1776
I was wrong about 80 percent it can be lower. They have to suppress competition to be an illegal monopoly at any percentage.
Justice Dept site
Where monopoly power is acquired or maintained through anticompetitive conduct, however, antitrust law properly objects.
Monopoly power is conventionally demonstrated by showing that both (1) the firm has (or in the case of attempted monopolization, has a dangerous probability of attaining) a high share of a relevant market and (2) there are entry barriers--perhaps ones created by the firm's conduct itself--that permit the firm to exercise substantial market power for an appreciable period.(16) Unless these conditions are met, defendant is unlikely to have either the incentive or ability to exclude competition.(17)
Following Alcoa and American Tobacco, courts typically have required a dominant market share before inferring the existence of monopoly power. The Fifth Circuit observed that "monopolization is rarely found when the defendant's share of the relevant market is below 70%."(22) Similarly, the Tenth Circuit noted that to establish "monopoly power, lower courts generally require a minimum market share of between 70% and 80%."(23) Likewise, the Third Circuit stated that "a share significantly larger than 55% has been required to establish prima facie market power"(24) and held that a market share between seventy-five percent and eighty percent of sales is "more than adequate to establish a prima facie case of power."(25)
When should we expect the next Exposing The ID video?
gonna take a little break but i'll be back to it soon enough!
@@ProfessorDaveExplains nice
Im changing the names to big corp names when I play this with my kids one day.
nice improvements to the usual style,
keep up the good work!
actually, it is physically impossible for monopolies to sustain themselves in a free market. the only way they can do so now is because of govt intervention (intellectual property laws, subsidies, etc) the second a monopoly arose in a free market, & is ostensibly charging high prices, it paves the way for small firms to come and undercut those prices. liquidzulu made a great video going into much further detail.
no, as i wrote, there are barriers, like financial ( just buy small concurrent), technological (huge sector with 100 year old traditions in some business is impossible to compete), standardization (big producer creates standards, like Web technologies, what are worse that they can be, however small producer can not compete with it) And for example intellectual property rights are necessary in capitalistic system- you invested in it and you suppose to have it as a property, or else you will not have motivation to invest.
@@cicik57 competition can still arise during all of those circumstances & with regard to IP - You can’t steal intellectual property because it is not rivalrous. If someone steals your keys, you have lost them. If someone copies your intellectual property, you still have access to it, therefore it is not a legitimate form of property. for property to be legitimate, it needs to be scarce. your motivation argument falls apart under scrutiny: patents do not facilitate innovation, as proven by numerous studies, namely "patents and the regress of useful arts" it has been found that produces are both higher quality and cheaper in the absence of IP laws.
@@ghost7ii692 okay i am glad that you have this (not really capitalistical for me) position, because that would make dissapear lots of today kinds of capitalistical investments. You might give some example where it works without of IP laws. With it comes publication question. In order of IP to be public, an inventor have to publish it OR you have weaker version of barrier, like even without IP laws, an inventor will try to hide his invention and those who manage to get information about it (legalized industry spying) will get it ...
@@cicik57 there is nothing immoral with hiding an invention, nor does this stifle innovation as aforementioned. if an inventor creates a new product, people should be allowed to make copies and compete with them - not only does this reduce the price for consumers, it raises overall quality too. granting a businesses a monopoly on certain products, such as life-saving drugs, has been disastrous & has led to many medical bankruptcies & deaths. IP laws are immoral, & not effective at improving quality.
@@ghost7ii692 look, the issue is, if we have absence of lP laws BUT he successfully hides an invention ( method of production, some important info, etc), the barrier still exist.
Sony having an oligopoly in the Anime localization industry in the United States can be considered an example of this too
Question, but how does this apply to multi-national corporations? It's spread to many countries that all have their own regulations
This is great, thanks
Great work as always prof Dave
Thanks
I have a question about neurons and crowds of people and other similarities
Hey Dave, I don't know if you'll read this but I'm struggling a lot with chemistry AS. Can you give me some of best videos to help me? I could add more detail if you want that
Look at his playlists. He has more than one chemistry playlist.
@5:10 That is completely false. In a free market, without the government manipulating the market, there's no barrier for anyone to enter the market and compete.
The point was that the most efficient market position is a monopoly. Although this is often just consolidation. Consider… RUclips. While there are viable competitors, YT is currently the best platform. The rise of sites like rumble and odysee have helped to remind RUclips that it can’t be a bad actor. Same thing with metas rival to twitter(threads) or parlor. These apps reminded the big companies that they can’t be opposed to the consumer. That ultimately. If the service is bad enough that the consumer will flock the next best option.
But yeah. Since the market is always in flux. Monopoly is fairly unlikely for most firms.
The barriers are MADE by the company in the lead currently. The company with the most money can easily take a loss and either buy out their competitors or undercut them so they go bankrupt/are forced to sell. The one with the most capital has way more influence on the market and can potentially take the loss, the startup can not. This is different based on the industry but there are a ton of mergers that get blocked by the government for this exact reason.
I mean honestly just look into any history at all that is past these last 20 years. There was literally a thing called the "phoebus cartel" which is like a textbook example of an oligopoly. That ordeal had absolutely no government interference and it ran for 14 entire years and was only broken up by the constituents.
Natural monopolies isn't accepted among economist because it doesn't happen
Idk how can you say that when every intro to economics course mentions natural monopolies. Do you think there’s a plethora of companies providing railway infrastructure from town A to town B?
Their's quite a bit of railway companies actually
@@toasterbath1795 It's there's. Their's is not a word. Those railway companies act monopolistic and stick to either the East or West of the US.
hi
Professor dave is based???
Nah he’s a lib
@@TheCosmicGuy0111 why is being a liberal concidered bad?
He been on that
@@magmati55
Because NEOLIBERALISM
@@magmati55 they keep wars going. They poke others to get the wars started...
I liked the netflix monopoly tho. Now gotta pay a lot more for different services
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Mr Dave......
Excellent coverage of the concept. Other than funding the operations of a Republic government and the legal system, defense is the only other government function sanctioned by the US Constitution. All other creations of monopolies, whether public or private are unconstitutional and will do more harm than good. That is not to say the government shouldn't subsidize what is valuable to the American people (innovation, etc.), but never to the point where there is a government sponsored monopoly. This could create a conflict of interest and opportunity for abuse by those in government who are power seeking and not REPRESENTATIVE OF ALL of its citizens - global examples being China's and Russia's state owned enterprises and enterprise zones. That is not to say that the US doesn't have any state owned enterprises, but most/all of these are related to supporting commerce standards across state borders (transportation infrastructure, finance regulation, US Currency, US Mail, national parks, etc.) that make it possible for ALL US citizens to create wealth, health and abundance for themselves and their families.
The US Constitution makes no mention of economic policy. So, I don't see how govt supported monopolies could be considered unconstitutional.
An example of a successful, well-regulated, federally supported monopoly *was* the Bell Telephone company. Without govt oversight & support phone service would have been costly and never expanded to rural areas where it was unprofitable. Competing and incompatible phone companies would have sprung up everywhere once Bell's patents expired. It would have been a very expensive, and incompatible mess similar to 1990s cell phones.
@@TonyPombo Yeah, I probably didn't mean unconstitutional, I really meant not mandated by the US Constitution. If not mandated, it should be left to the states to decide or to be added via the amendment process per the will of the people. The writers of the US Constitution were government minimalists and my point was that they intentionally left "everything else" out, so I felt it was implied. The phone system is yet another example of supporting interstate commerce and defense communications. Thanks for the comment.
Patents are in the Constitution.
@@ethelredhardrede1838 That is true... Article I, Section 8, Clause 8 secures the rights to copyright and IP for a limited period of time. This law applies to all US Citizens, not just corporations. The idea for IP is to allow the creator to negotiate the terms of compensation when they partner with a producer to implement the idea at scale for the benefit of society. It allows for creative people to do what they do best. When we talk about a monopoly, we are talking about a government sanctioned and possibly funded organization that results in a power imbalance that blatantly benefits one segment of the population while hurting another.
@@matthewcerini699
Patents have always been an allowed monopoly. Its short term.
Monopolies are not always allowed and often have been contrary to law. You are not talking about real monopolies. You are talking about regulated industries that have a limited monopoly. There are others, such as Microsoft was a monopoly. The original ATT sure was. That no longer exists and the name was purchased by a Baby Bell.
At one time the US had a lot of real monopolies. US Steel, Sugar Trusts, Standard Oil, ATT, Edison lots of others. See Teddy Roosevelt.
Teacher Unions/Public School monopoly described well.
Thank you, from one with an Economics background.
Teacher Unions and Public Schools are not monopolies. They are not a for-profit industry.
They’re not a monopoly, since a monopoly is the only company that supplies a good in a market. They’re an organization that represents workers in collective bargaining. They’re the counterpart of employer’s associations, which represents corporations in collective bargaining. If you know about economics you should understand the difference.
@@jmiquelmb
A public school is a defato monopoly due to the fact the one has no ability to select another product, in this case, a school of one's choice.
There is defacto one, and only one, product available
Why?
Teacher Unions legally bribe Dems with campaign contributions.
Teachers?
Wonderful
Teacher unions?
Anti-free market.
They make every effort to prevent competition via the legal bribes, that in turn enable distortion of the education market. If fact for those unable to afford private education, these bribes entirely eliminate an education market place.
This would be transformed from a monopoly into at least an oligopoly via School Vouchers.
@@MarcPagan First, the term is "de facto". Second, they're not a monopoly because you can go to a private school if you wish so. Third, many systems allow parents to choose among different public schools. Fourth, you're mixing teacher unions with public schools, which are not the same. You can have unionized teachers in a private school. Fifth, I explained to you how the corporative counterpart to a worker's union is the employer's association, not a company that holds monopolistic power.
@@MarcPagan You are really considering the education of children a business ?
You say: "Monopolies are almost inevitable in free markets"
It should say: "Monopolies ARE inevitable in free markets (as long as there is private property of the means of production)".
Even in ancient greece and rome, we see things like big land owners concentrating wealth because they were able to control the markets and push out smaller farmers, buying their lands and even pushing them into debt-slavery. A practice that was common in ancient greece until it was finally abolished since the people realized they had been screwed over by the system.
I suggest the read "Theory of Property" by Pierre-Joseph Proudhon for a better understanding of how private property screws us over and deprives us from personnal property.
>as long as there is private property of the means of production
tbh even with worker-owned production, the market would still allow for monopolies to form.
this is because markets are driven by the profit motive and generalized commodity production.
in a market-socialist economy, some worker-owned businesses would eventually become extremely powerful and will use their money to lobby the government and pass policies that allow for wage labor, and thus, for private property, to return.
anyways, great comment. and a great video by prof Dave as always.
@Nicholas Time yes!
@Nicholas Time Let's see you say that when someone breaks into your house and takes your property.
@@lainiwakura1776 there is a difference in private property and personal property. Private property is the tools of production that are owned by a person/company that are used by others use to produce value. Such as farmland, machinery and factories. Personal property is what is in your house.
Capitalist economic theory doesn’t separate the two. Socialist economic theory does. That is your confusion.
When you hear a socialist say property is theft, they are saying that private ownership over the means of production that all workers use leads to theft of value created in the form of leveraged profits. They aren’t coming for your TV.
They are coming for Eli Lilies mass of wealth from owning the only means of production for insulin and artificially inflating the price, because they know people will pay it or die.
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Lmao "costs go down because companies produce goods more efficiently".Maybe costs for said companies but not for buyers... Prices don't go down because it's cheaper to produce something. Companies will exploit it's workers and customers as much as they possibly can which means prices won't go down unless a competitor appears or government interferes by either setting max price or taking over the production. That's why medical industry is the worst one to pick for lib takes like that because demand for medical goods is not elastic at all. Medicine should not be commodified, governments should produce it for the benefit of the people.
Yes, no business is going to lower prices out of the goodness of its heart. It has no heart. Business is at best an amoral institution with the single ambition to maximize profits. They must be prevented from acting on their worst impulses by the restraining hand of society.
We seriously need to reevaluate the role of business and corporations in America, and especially the societal value of limited liability protections. Corporations ostensibly exist for the purpose of increasing the quality of life for the public, and we grant them privatized profits, socialized costs, and limited liability on the assumption that it serves our society to do so.
All regulations and oversight of corporations should stem from the fact that they are given those privileges with the guarantee that they are acting in the public interest.
And yet, without “corporate greed”, I might still be using a typewriter instead of an iPad.
Apple and Microsoft have raised prices, but look at the productivity gains brought to their customers?
@@DM-zq8qy Bruh just look at how many things NASA invented: LEDs, headphones, laptops and fuckton more. You're so cucked by billionaires that you think you somehow need to be exploited by them. Most of the inventions - especially in early stages is done by state funded universities and agencies. Meanwhile bourgeoisie make money because of the sole fact they already have money. Their goal is not to be innovative, but to increase profit which literally means they could be more innovative but it's not affordable to be so. That money could be used by states to progress our societies way more.
@@DM-zq8qy To be fair, it’s corporate greed and cheap labor from China, a single party dictatorship that is not capitalist really.
@@jmiquelmb Cheap energy from coal and destruction of environment in China has put others in a real competitive disadvantage. Lots of factors.
Elsa Gate
how is this relevant
@@Skywarslord amogus
Dont we already have this?? Oh I'm confusing it with fascism...
Facism is a way to run a government, not an economic policy. It is also closely tied with Communism.
@@lainiwakura1776 Do tell us how the Nazis were actually socialists.
@@psltmtir Well, umm... Nazi does stand for "Socialist German Workers' Party."
But Wait! There's more... much more!
ruclips.net/video/mLHG4IfYE1w/видео.html
That's a proper line of reasoning... Brings to mind the old saying "the greatest trick the devil ever played was convincing the world he didn't exist..."
@@ClyDIley Ah yes, youtube history channels, the forefronts of historical citation