Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.1 6/24/83; site umcp-cs.UUCP Path: utzoo!linus!philabs!cmcl2!seismo!umcp-cs!mangoe From: mangoe@umcp-cs.UUCP (Charley Wingate) Newsgroups: net.politics Subject: Re: Supposed monopolies: Standard Oi Message-ID: <1186@umcp-cs.UUCP> Date: Sun, 11-Aug-85 00:08:41 EDT Article-I.D.: umcp-cs.1186 Posted: Sun Aug 11 00:08:41 1985 Date-Received: Tue, 13-Aug-85 00:19:25 EDT References: <1105@umcp-cs.UUCP> <7800366@inmet.UUCP> Organization: U of Maryland, Computer Science Dept., College Park, MD Lines: 78 In article <7800366@inmet.UUCP> nrh@inmet.UUCP writes: >>>The following table shows Standard's >>>difficulty at holding a monopoly on oil refining: >>>date market share >>>1899 90% >>>1904-1907 84% >>>1911 80% >>I dunno, 80% seems pretty damn large to me. >That's okay -- 80% is hardly a "monopoly", especially when independents are >growing quickly. Apparently I am using the language more loosely than others. Absolute monopoly isn't the question for me. It's a question of relative influence. As I recall, classical economics of perfect competition requires, among other things, relative parity in the various competitors market influence. Now a company which has an 80% share of the market has, I submit, more influence than one with 2%. >>Which goes to show another reason why monopolies are undesirable; they can >>do a lot of damage when they collapse. The current distress in the auto >>industry is a prime example. >I don't see that a large company has to be a monopoly to cause problems >when it collapses -- all it has to do is employ enough people and >resources. Of course if the government tries to help out the problem >can get worse in two ways: > 1. The government can succeed in saving the company, > which amounts to rewarding incorrect allocation of resources. > (At this point the company may (like Chrysler) do somewhat better, > but the lesson becomes clear -- if you've the clout, and you're > in trouble -- don't bother fixing things -- it's easier to yell > for help). > 2. The company can fail despite the aid -- and guess who gets > the bill for delaying the inevitable? Do you think the > executives don't get paid? And the third is, of course, to let the thing collapse anyway. For all intents, the American car makers before 1972 could be considered a near- monopoly; they all acted in the same way (ignoring Jeep for a minute), and commanded all but a fairly small fraction of the market (most of the rest being VW). It is rather interesting that the only group capable of penetrating the market were the Japanese, who are a monopoly in their own country, and the Germans, who share a certain vision of cars. No maker not of comparable size to the Big Three has been able to increase its share against them; the smaller american makers in the mold of GM and Ford had to be rescued by outside capital. >One of the odd public misperceptions of corporate collapse is that the >resources owned by (say) the automobile companies would simply >disappear if the automobile companies were to fold. Not so! Those >factories, furnaces, office buildings, computers, (and yes) employees >become available for other purposes. Among them the formation of >new and better (as well as new and worse!) automobile companies, and >the general lowering of price of these items (supply increased). This is too simple; it ignores the loss of income (and thus demand), and it ignores the fact that these assets must be acquired by the new companies. Let us suppose that Chrysler had been allowed to collapse. The first effect of this would have been a drop in both the local spending and investment around the plants, as the laid-off workers lost income and burned their savings. If sufficiently prolonged, the locals economies would begin to be depressed. In addition to this, there is all this unused equipment lying around, most of which is suitable only for making cars. To put it to use, someone has to collect together enough capital to purchase it. This takes time; in the meantime, the displaced employees have to find new work. As the Depression showed, this can be a sufficient shock to cause the economy to continue to collapse. Apparently Mr. Howard doesn't see this to be a problem, but I sure do. C WIngate