The Instigator
AlextheYounga
Pro (for)
Losing
0 Points
The Contender
GCT
Con (against)
Winning
14 Points

The Idea of a Natural Monopoly is a Fallacy

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Post Voting Period
The voting period for this debate has ended.
after 2 votes the winner is...
GCT
Voting Style: Open Point System: 7 Point
Started: 12/10/2012 Category: Economics
Updated: 4 years ago Status: Post Voting Period
Viewed: 6,851 times Debate No: 28027
Debate Rounds (5)
Comments (21)
Votes (2)

 

AlextheYounga

Pro

First round will be the acceptance of terms.

Natural monopolies, that is, where all or most sales are undertaken by a single firm in the market without government intervention, cannot exist. Only government can create harmful monopolies through government intervention by decreasing competition on the market. Harmful monopolies cannot occur on the free market.

Natural monopoly
A monopoly describes a situation where all (or most) sales in a market are undertaken by a single firm.

Fallacy
an error in reasoning.

Hope someone accepts. :)
GCT

Con

I accept and am intrigued to see how my opponent shows that monopolies could never exist in a free market given the many other types of "barriers to entry" other than regulation.

I accept the definitions provided by Pro.

BOP rests with Pro

Good Luck
Debate Round No. 1
AlextheYounga

Pro

Thank you for accepting this challenge. Good luck J

A Natural Monopoly Has Never Occurred

I will start off by stating that there has never been a recorded natural monopoly. One might look at this statement and think, “Well what about the robber barons of the early 1900s?” Truth be told, these were not monopolies at all!

A good example that everyone thinks of is John D. Rockefeller and the Standard Oil Company, who is demonized for basically, being a good businessman. Rockefeller did an amazing job at running a business. He devised so many ways for reducing the amount of money he had to spend and still make a great product. Rockefeller was known for being extremely generous with his money. He paid his employees significantly more than the competition did. He also believed in rewarding his most innovative managers with bonuses and paid time off if they came up with good ideas for productivity improvements, a simple lesson that many modern corporations seem never to have learned. Kerosene went down 90% due to Rockefeller. Carnegie, another robber baron, decreased the price of steel by 90% as well.

Rockefeller purchased many of these poorly managed operations and put their assets to far better use. There was never any threat that these "horizontal mergers" — the combination of two firms that are in the same business — would create a monopoly, for Standard Oil had literally hundreds of competitors, including such oil giants as Sun Oil, not to mention its many large competitors in international markets. Why am I supposed to hate these people?

One of Rockefeller’s harshest critics was Ida Tarbell, who was actually the brother of the treasurer of the Pure Oil Company, who could not compete with Rockefeller’s low prices. She published propaganda-like articles that were often illogical, emotional, and lacked any serious attempt at economic analysis.

Through the process of “rent-seeking,” where a competitor uses political tactics to harm a superior competitor by creating laws and regulations, the smaller companies were able to eliminate the Standard Oil Company.

Smaller competitors finally crippled the Standard Oil Company by lobbying the federal government to enact the antitrust regulation.

Government Can Only Create Monopolies

The very term "public utility" … is an absurd one. Every good is useful "to the public," and almost every good … may be considered "necessary." Any designation of a few industries as "public utilities" is completely arbitrary and unjustified.
— Murray Rothbard,
Power and Market

Public utilities are a good example of government-made monopolies. Government grants monopolies to certain water, electricity, and natural gas companies. Competition is excluded from these companies with horrible results. Americans have to deal with shortages all the time with these public utility industries such as hot water shortages, while in the free market, such as with groceries, Americans experience little to no shortages at all. This is a good example of why legal monopolies cause disaster in many industries.

Without the dynamics of a fully free market, utility providers have no way of knowing how to work to their and to consumers' advantage — and everybody's quality of life inevitably suffers as a result.” –Friedrich A Hayek

The Impossibility of a Natural Monopoly on the Free Market

Competition on the free market eliminates the possibility of a natural monopoly as long as there is no regulation hindering the competition on the free market.

A good example of how competition stopped a so-called natural monopoly would be in 1880.

In 1880 there were three competing gas companies in Baltimore who fiercely competed with one another. They tried to merge and operate as a monopolist in 1888, but a new competitor foiled their plans: "Thomas Aha Edison introduced the electric light which threatened the existence of all gas companies."[21] From that point on there was competition between both gas and electric companies, all of which incurred heavy fixed costs which led to economies of scale. Nevertheless, no free-market or "natural" monopoly ever materialized

When monopoly did appear, it was solely because of government intervention. For example, in 1890 a bill was introduced into the Maryland legislature that "called for an annual payment to the city from the Consolidated [Gas Company] of $10,000 a year and 3 percent of all dividends declared in return for the privilege of enjoying a 25-year monopoly.[22] This is the now-familiar approach of government officials colluding with industry executives to establish a monopoly that will gouge the consumers, and then sharing the loot with the politicians in the form of franchise fees and taxes on monopoly revenues. This approach is especially pervasive today in the cable TV industry."


Another example of a so-called natural monopoly is cable tv. The idea that cable tv was a natural monopoly is a false as well, for there was a very longstanding existence of competition in the cable industry for years before the government issued anti-monopoly regulation upon the industry.

A natural monopoly cannot exist because there is always competition on the market.


http://mises.org...
http://mises.org...
http://mises.org...



GCT

Con

In this debate my opponent will not only have to show that there has never been a Monopoly without Government intervention but also show how such a situation could never arise.


For me to defeat the resolution I must either provide examples on Monopolies that have existed without Government intervention OR show that such a situation is feasibly possible.


I will first start with my opponent’s case before making my own.


A Natural Monopoly Has Never Occurred


My opponent starts with a bold claim and provides examples of companies that are typically referenced when discussing Monopolies and attempts to show they are not monopolies. What is interesting is that his very example shows a Natural Monopoly which was then broken up due to federal government intervention!


Standard Oil: Standard Oil was an integrated oil producing, transporting, refining and marketing company. In 1904 it accounted for 91% of the entire American refining capacity and 85% of the sales <1>. In the 1890s it expanded to China as its production started to exceed US demand <2>. The definition of a monopoly, as provided by opponent, is “where all (or most) sales in a market are undertaken by a single firm”. In this case the market is the US market for which Standard Oil accounted for 91% meeting both definitions of a Monopoly.


My opponent then explains how this Monopoly was broken up by “rent-seeking”/government lobbying until they intervened 1909 and broke the company up.


To conclude I have shown not only that my opponents example was indeed a Natural Monopoly I have also shown that the Government was in fact responsible for breaking it up which leads nicely onto the next point.


Government Can Only Create Monopolies


My opponent first provides a quote from Murray Rothbard and gives examples of Government made monopolies. I concede that Governments can and do create monopolies. This is however irrelevant to the debate which is “The Idea of a Natural Monopoly is a Fallacy”


Governments can create Monopolies but they often break up Monopolies as the Standard Oil example above shows.


I will show in my arguments how monopolies can and do form without involvement of Government


My opponent then provides a quote from Friedrich A Hayek stating why monopolies are bad for everyone. This is again irrelevant to the debate. We are not discussing the pros and cons of a Monopoly only whether “The Idea of a Natural Monopoly is a Fallacy”


The Impossibility of a Natural Monopoly on the Free Market


My opponent provides 2 quotes in bold listed below but fails to explain why competition would make a Monopoly impossible.


“Competition on the free market eliminates the possibility of a natural monopoly as long as there is no regulation hindering the competition on the free market.”


“A natural monopoly cannot exist because there is always competition on the market.”


I concede that competition helps reduce the possibility of a Monopoly forming, however I strongly dispute that competition “eliminates the possibility” or means that it “cannot exist”.


As such I am sure there are many examples where competition meant that no Monopoly formed. I actually disagree that my opponent’s examples show this but as I concede the concept therefore there is no need to waste character space arguing this further


Contention 1: Barriers to Market Entry are the cause of Monopolies


My opponent states that only through Government intervention can Monopolies be formed. Here I will provide a list of other conditions which may cause a monopoly.


a) Technology: If one company develops or invents a new product that others can’t replicate or don’t know how to replicate then this company immediately has a Monopoly of the market


b) Resources Control: There is only one source of the product. A news item I read yesterday is a funny example where Novak Djokovic<3> bought the entire world’s supply of Donkey Cheese. He now controls 100% of World sales at least for now.


c) Economies of Scale: This is where one entity becomes so big it can utilize more efficient production techniques to produce goods cheaper than competition. It then prices them out of the market exactly as Standard Oil did in the example above.



Contention 2: Unethical Business Practices in the Free Market


Excluding Competitors Practices: An entity can become or maintain a monopoly position through unfair business practices such as colluding or threat tactics. An example might be the various drug gangs/mobs each controlling their own “markets/cities” through threatening/killing the opposition. Another might be a company with large capital reserves producing and selling goods at a loss until all competition has been priced out of the market.


Contention 3: Examples of Natural Monopolies


To be fair to my opponent I will only list one example per round which he should show is only caused by Government intervetion



  1. Microsoft Windows: Microsoft currently controls over 91% of the market in terms of what Operating System you use. <4>



Back to my opponent




<1> Daniel Yergin, The Prize, New York: Simon & Schuster, 1991, p.79


<2> http://en.wikipedia.org...


<3> http://sports.nationalpost.com...


<4> http://marketshare.hitslink.com...

Debate Round No. 2
AlextheYounga

Pro

Now, I think that it would be trivial to only take into account the basic definition of a monopoly. Surely there are other characteristics of a monopoly that should be taken into account as well. My opponent included other characteristics as well so I only see it fair.


In 1904 it accounted for 91% of the entire American refining capacity and 85% of the sales.
I won't argue with this. Standard Oil is a big company.

But, one thing my opponent mentions is Microsoft, which is also a very big company. But, it is not technically considered a monopoly by law. Microsoft has been charged with illegal actions of manipulating certain programs of other companies to try to acheive monopolistic power, but these charges were also overturned due to errors in the due process of law. So if Microsoft isn't considered a monopoly, how can Standard Oil be considered one?

Also, we must address the fact that size does not always mean monopoly.

Although monopolies may be big businesses, size is not a characteristic of a monopoly. A small business may still have the power to raise prices in a small industry (or market).[4]

Now this surely can't be applied to Standard Oil, OR Microsoft, for they have done nothing but lower the prices of their industries. They made their industries much more efficient. As I stated above, the price of Kerosine went down 90%.

Furthermore, it is impossible for an industry to do this and still remain in power. Let's say Wal-Mart, which is currently the largest superstore industry in America, were to suddenly raise their prices higher than, let's say...Target. Wal-Mart would begin to lose business because naturally, people want to spend less and have no incentive to spend more money on a product they can always get cheaper. If Standard Oil would have done this, they would have lost business sales, and Sun Oil would have become a larger company on the market as long as Standard Oil did not restructure. The idea that these companies can charge high prices because of their place on the market is illogical because there is always competition.


This is however irrelevant to the debate which is “The Idea of a Natural Monopoly is a Fallacy”

You're right. I included this to show where monopolies truly come from, which is not the free market.


My opponent makes an error in one of barrier arguments.

b) Resources Control: There is only one source of the product. A news item I read yesterday is a funny example where Novak Djokovic<3> bought the entire world’s supply of Donkey Cheese. He now controls 100% of World sales at least for now.


This would technically not be considered a monopoly. This is what is called a monopsy, where a company is the only producer of a certain good and there is no competition whatsoever. This should not be taken into account.


I appreciate the patience and the professional attitude of my opponent. Civil debates are much better than basically name-calling debates. :)

http://en.wikipedia.org...
http://en.wikipedia.org...

GCT

Con


Well getting straight into it.


A Natural Monopoly Has Never Occurred


Standard Oil: My opponent concedes that Standard Oil is a very large company however questions whether it has all the characteristics of a Monopoly. I note he brought forward no specifics to support his view. As BOP rest with my opponent I ask him to explicitly explain why Standard Oil is not a Monopoly.


Microsoft: My opponent argues that Microsoft was not considered a monopoly by law (Appeal to Law) and then explains that a case was brought against it was dismissed due to “errors in the due process of law”. This is not quite correct.


Actually Judge Jackson convicted Microsoft for “taken actions to crush threats to that monopoly” <1> in November 1999. This implicitly shows that in the eyes of the law there was already a monopoly. Microsoft was punished by trying to maintain this monopoly.


The subsequent appeal due to “errors in the due process of law” is irrelevant to establishing whether Microsoft had a Monopoly.


The Power to raise and Lower Prices


My opponent then goes on to explain that being “big” is not enough to show a monopoly and that Microsoft and Standard Oil have done nothing but lower prices. As Monopolies in general mean less market competitive prices (i.e. Price Rises) this must therefore show that neither Microsoft nor Standard Oil are Monopolies. This fails on 2 points.



  1. Microsoft did nothing but raise prices: I have scoured high and low for any information online to show that Microsoft steadily reduced prices. I ask my opponent to support this statement

  2. Price reduction is a technique to obtain a dominant Monopoly status: I will agree that Standard Oil reduced prices. They did this as they had economies of scale (see my round 2). As they could produce and sell cheaper than all competitors, the competitors went out of business leading Standard Oil to be a Monopoly. Monopolies make money by first pricing all competition out of the market. Once they dominate the market they then increase the price as there is no longer any competition for buyers to go to. Falling prices from Standard Oil is therefore actually support of my position


The Walmart example: Walmart is not a monopoly and therefore cannot exercise monopoly power. There the example is irrelevant to the debate.


Government Can Only Create Monopolies


My opponent has yet to show why only Governments can create monopolies. Note examples are not enough to prove this point. Points extended



The Impossibility of a Natural Monopoly on the Free Market


My opponent has yet to provide details as to why a Monopoly is impossible. Points extended


Contention 1: Barriers to Market Entry are the cause of Monopolies


My opponent drops all my arguments except for my Resources Controls example which he claims is a monopsony.


“A Monopsony is an example of imperfect competition similar to a monopoly” <2>


Given this definition I fail to see the objection to my example.


Points on all other points extended.


Contention 2: Unethical Business Practices in the Free Market


Dropped by my opponent. Points extended


Contention 3: Examples of Natural Monopolies


I defended my Microsoft example in my rebuttals. Points extended


I thank my opponent and look forward to the next round



<1> http://en.wikipedia.org...


<2> http://en.wikipedia.org...


Debate Round No. 3
AlextheYounga

Pro

My opponent's contentions do not quite make much of an argument:


a) Technology/b) Resources Control

My opponent lists two contentions which are basically the same idea, a monopsony, which is not classified as a natural monopoly, for there was never any real competition to begin with. These do not apply.

And Contention 2: Unethical Business Practices in the Free Market

My opponent makes a mistake in making in assumption that in a free market, threatening other businesses and or murdering other business owners would be legal. This would never be legal in any society. The free market is not necessarily lawless, just unregulated. Murder will always be illegal no matter what.

Microsoft did nothing but raise prices: I have scoured high and low for any information online to show that Microsoft steadily reduced prices. I ask my opponent to support this statement.

The cost of an IBM computer has decreased tremendously. An IBM computer would cost around $3000 dollars back in 1980's. Today, you can buy a decent IBM from about $300 and up. Competition is a major factor in why prices have gone down, otherwise, IBM computers should still be around $3000 dollars if we were to buy into this natural monopoly theory. The price of computers have been decreasing around 11% to 12% for the past three years. Just like Standard Oil, Microsoft has found more convenient ways of creating their product. In Microsoft's case, it's making technology smaller and smaller, so that more technology can be put into one item. Microsoft played a large role in the decreasing price of computer technology.

Once they dominate the market they then increase the price as there is no longer any competition for buyers to go to. Falling prices from Standard Oil is therefore actually support of my position.

I fail to see how this supports your position, for they never did raise their prices above competition prices. And no company has ever succeeded at outpricing the entire market and eliminating competition completely. It is also illogical for a company to do so, for if a company raises it's prices, this gives consumers the incentive to buy elsewhere, or for more competition to be created. My opponent's argument actually fails on two points:
1. Standard Oil never raised their prices above competition. Standard Oil never eliminated all competition in order to raise their prices.
2. It is illogical for companies to raise their prices, even if there is absolutely no competition on the market, for this gives way for more competition to come onto the market, which no monopoly would want.

GCT

Con


I will first start with the definition of a Monopsony before going into rebuttals.


Monopsony: "In economics, a monopsony (from Ancient Greek μόνος (mónos) "single" + ὀψωνία (opsōnía) "purchase") is a market form in which only one buyer faces many sellers. It is an example of imperfect competition, similar to a monopoly, in which only one seller faces many buyers. As the only purchaser of a good or service, the monopsonist may dictate terms to its suppliers in the same manner that a monopolist controls the market for its buyers." <1>



A Natural Monopoly has never Occured


Standard Oil: My opponent failed to address how Standard of Oil was not a monopoly. I showed successfully that in Round 2 how it met the definition of one and Pro has failed to argue against this. Point to Con


Microsoft: I showed in Round 3 how the legal system deemed that Microsoft had a monopoly. My opponent is yet to address this. Point to Con


My opponent then discusses general costs of IBM computers, reducing costs of laptops in the last 3 years and makes sweeping statements about technological advances and cost reduction. Not only does this have no relevance to the Microsoft Monopoly (they had a software monopoly) but he also provides information for IBM which has no relevance.


Price Reduction: Once a company has successfully driven competition out he can raise prices because.....there is no more competition for the customers to go to. I will try to illustrate with an example to make it clear.


Example: Imagine you have 5 car making companies all making sedans (healthy competition). One car maker (with sufficient reserves to cover losses due to this pricing strategy) suddenly halves the price of its cars. All customers therefore buy from this car maker and the 4 others eventually go out of business due to lack of sales. So now you have one car maker (monopoly) and he suddenly quadruples the price of cars. The consumer is forced to pay this as there is no more competition. It would take a new competitor a long time and a lot of money to build factories, hire a workforce, design a car and finally produce and sell it. This costs of entering the market are a typical example of a "barrier to entry" which as I explained in round 2 causes monopolies.


Monopsony or Monopoly: My opponent claimed my examples of "technologies/resource control" are not examples of monopolies. They and the Novak Djokovic are clearly not! They are sellers with numerous buyers not numerous sellers with one buyer. Point to con.


Unethical Business Practices: I make no mistake about the free market and neither should my opponent. While the mafia are illegal is does not stop them doing what they do.


Over to my opponent for final round.




<1> http://en.wikipedia.org...


Debate Round No. 4
AlextheYounga

Pro

AlextheYounga forfeited this round.
GCT

Con

Pro fortfeited the round. Vote Con.
Debate Round No. 5
21 comments have been posted on this debate. Showing 1 through 10 records.
Posted by AlextheYounga 4 years ago
AlextheYounga
I deeply apologize about this debate. My internet has been totally screwing up this past week and my internet company is ridiculous. I deeply apologize
Posted by malcolmxy 4 years ago
malcolmxy
PS - IBM doesn't make IBM personal computers any longer. That former division of IBM is now the property of Chinese company, Lenovo. IBM makes computers that compete with Humans in trivial games, and they are heavily invested in quantum computer research, but beyond the occasional super computer, they don't make computers any longer.
Posted by AlextheYounga 4 years ago
AlextheYounga
http://www.freeby50.com...

I forgot to add my source in the argument. I'll add it here. It's about the price of computers.
Posted by HeWhoKnowsAll 4 years ago
HeWhoKnowsAll
The way the jews work things is anytime things come close to the truth they call it a conspiracy theory and make it seem totally ludicrous. If you really want to discover more I can give you websites that some may term "conspiracy theory" but I can not divulge the actual knowledge I know. If you pursue this you will eventually know what I do. It is only from my heritage that I know the truth but let me know if this is truly something you want to learn and I will help you. Best of luck.
Posted by AlextheYounga 4 years ago
AlextheYounga
Explain to me how they control the world. Give me a good website or message me and explain it. Ironically, I'm interested, and I'd like like to see how plausible this all really is.
Posted by HeWhoKnowsAll 4 years ago
HeWhoKnowsAll
But then again maybe you are, I certainly think so.
Posted by AlextheYounga 4 years ago
AlextheYounga
Maybe, but at least in my sterile little world, I'm not a douche.
Posted by HeWhoKnowsAll 4 years ago
HeWhoKnowsAll
It is exactly the weak minded people like you alex that have the world in the state it is now. Cecil Rhodes was not jewish but was backed by the rothschild's and sold out a large share to Ernest Oppenheimer, a jew, to preserve his life and what he had left in what became known as Rhodesia (named after him) and later when I was there in southern Rhodesia it became Zimbabwe and I witnessed first hand the evils that men can do to there own people. Maybe if your world had ever existed outside your sterile little community and your computer you would know what you are talking about!
Posted by AlextheYounga 4 years ago
AlextheYounga
Well, first of all, HeWhoKnowsAll, you're a jerk, and I could care less what you think you know at this point. This isn't the best way to share your ideas. I've heard of this idea of Jews controlling the world before. My uncle is what most call a conspirator, although listening to him explain it all is amazing. His stories trace all the way back to the crusades and to this guy named Cecilia Rhodes or something. Although intriguing, I don't know if I can believe that a single group of people can control everything. We can't even stop criminals in jail from obtaining drugs even though they are being watched 24/7.
Posted by GCT 4 years ago
GCT
@HeWhoKnowsAll

If I understand you correct this is your thinking

(1) The 13 control the reserve
(2) The governement and every entity rely on the reserve
(3) Therefore the 13 have control of everything
(4) Therefore there exists a Monopoly

There are alot of problems with the above logic which I'm happy to debate you on. Can you think of a good resolution to debate?

P.S. Having predicted all those things you must be very powerful and rich! Good of you to spend your time debating with us clueless lowlifes.
2 votes have been placed for this debate. Showing 1 through 2 records.
Vote Placed by DoctorDeku 4 years ago
DoctorDeku
AlextheYoungaGCTTied
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Total points awarded:07 
Reasons for voting decision: The forfeit is the biggest voting issue, but aside from that Pro's clarity and extension are terrible. Pro drops lots of arguments through the course of the round and outright rejects other arguments. Even without the forfeit I doubt I would have voted pro.
Vote Placed by Niwsa 4 years ago
Niwsa
AlextheYoungaGCTTied
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Total points awarded:07 
Reasons for voting decision: FF