The problem is enterprise will naturally rise to influence political bodies. The free market has never existed because self interested market players will not allow it.
Brian Chan If there are no laws to influence/bribe, then the free enterprise stands up to monopoly. Friedman’s argument is precisely that, less government = less monopoly, one of the reasons for less government/laws is it also reduces/eliminates corporate corruption. On a different topic, greed is good. Greed is what advanced the human civilization, for better or worse.
Milton was always smiling, polite and ready to teach - and that makes him such an easy guy to listen to and likeable even when you might disagree with him.
@@serdirtbagoftheleft4045 he had nothing to do with the Pinochet dictatorship. One of the Chicago economists married a Chilean, he got a job at a university in Santiago and ended up teaching his ideas to a generation of Chilean economists who would later help Pinochet. No conspiracies.
Well I mean, the pragmatic neo-liberal reforms done in Chile from 1982-1994 were probably the closest thing to a pure version of Friedman's policies being carried out properly and that was a success. The policies pretty much continued past that point with a few small tweaks until 2013 when the Socialist party won an election and diverted the countries economic policies. Even then, the countries that did adopt a good deal of his polices and stuck with them, benefited during the 90s and 2000s, even if they didn't follow them to the letter.
@godzilla poor pinochet worked so hard throwing communists out of helicopters, but the marxist poison infected his beloved chile anyway and is destroyed everything he worked so hard to build somehow it's a coincidence that chile had had the greatest economy of any south american nation for so many decades while all the other ones choked on their own vomit under socialism like venezuela is doing right now. communist filth is the worst plague to ever darken the earth.
Martien de Jong Precisely the opposite. Natural capitalism is achieved without government intervention. The success of Latin American countries was not that the dictatorships forced it to be capitalist through certain policies but rather it got rid of policies and the government removed itself from the economy which resulted in it reverting to a free market. Free market capitalism is closer to anarchism than authoritarianism because the more authoritarian the government becomes the less likely it is to be free. The free market arises out of natural cooperation between markets and businesses so no, free market cannot exist in dictatorships.
De Beers was one of his examples. The reason it does not fit into the standard model is that the customers for jewelry diamonds are not driven by the usual market forces. The customer is literally not looking for the best price, in fact paying more for an engagement ring only shows more (symbolic) commitment.
Amir Rocketcock Actually your example shows that a free market always makes workers more free by allowing different companies to compete for more humane working environments. One example is Henry Ford who raised his wages to levels that other companies couldn't compete with. Therefore he prospered and received all the talented employees. He didn't raise the wage because of some minimum wage law but rather he did it to compete against rival automakers.
Remember the good old times, when students let the professor talk and did not yell and shriek and were mentally stable without triggering? Awesome times...
I'm guessing you're a 20-something youngster who never lived through the 1970s, am I correct? And you're fantasising about the past you never lived in, right?
@@MrJason005 And I’m guessing you are one of the ones he mentioned who would “yell and shriek” when triggered by ideas other than your own, and/or anything mildly offensive, bc you’re mentally unstable and just generally love making those around you miserable, am I correct? And you're fantasizing that you’re _NOT,_ right?
@A one legged man there is no such thing in this world "100% solution". You can only aspire to achieve something to great extent , not a full one. Thats why there's neither 100% capitalist state or 0% capitalist state.
man side not I dont think Google is really a great example of a possible monopoly, if you want a more likely example look to things like movie companies. Disney has slowly been buying out the market and crushing its competitors for years and the biggest reason why it has the best chance of being a monopoly is because of the upfront costs. A large upfront investment is usually enough to scare away new competition. *although this still will probably never become a complete monopoly, it might though grow large enough to effect the market like one.
@@phillycheese1563 Disney are smart though. They buy subsidiary companies to create a "monopoly owned oligopoly" which is a fucking awesome concept but not a very good one for a competitive industry.
@@phillycheese1563 That is a good example but I think it is important to think over longer periods. 25 years ago Disney were actually in a relatively weak position. They made some very shrewd acquisitions, Marvel for example, which they raised the value of substantially by creating high quality movies for. So now they are in a strong position, but 25 years from now the very people who made the smart moves in the early 2000's will be gone, and there are no guarantees that those who replaced them will make the same smart moves, Star Wars for example seems a good acquisition, but they've not done as well with it as with Marvel. In addition, it is becoming cheaper and easier for small film companies to make higher quality content. Perhaps matching Disney in special effects is a long way off technologically for a small outfit, but story-driven, acting-driven productions are ever easier to do. We don't know where that will lead but I think Friedman is right even when it comes to Disney. One question I would pose is Amazon... what stops them becoming an effective global monopoly?
Andrew Fraser Sometimes competition comes from the most unlikely of places. I would wager 3D printing is the upcoming replacement to amazon if done properly. We’ll laugh at how we used to wait for things to be delivered to our door before we could use them.
it was this argument about monopoly that first got me to question what i had been programmed to beleive in school and actually learn about economics on my own. This man really opened up my eyes to what freedom means
I live in Canada. Thanks to governmental regulations, I have 2 airlines to choose from when it comes to flying domestically, I have 1 single company to choose from when it comes to trains, I have 5 mobile service providers to choose from (4 of which are owned by the same 2 companies). They fix prices, government makes it impossible to get new players into the game. These CEO's make their millions, these companies provide absolute horrible services at the absolute highest costs and I should believe that the Government is looking out for my best interests?
All in the name of ''the people and what they want''- while taking away any position anyone of us had prior so the rest can get what they want. People who are socialists are legally stealing other peoples goods, but they will always be criminals because of their golden ideology. One person cannot save the world, but he can help his neighbour. One group cannot save the world, but they can help other groups. One people cannot save the world, but they can help other people. When, exactly, did this get synonimous with stealing from people whom are more fortunate by no fault of their own, or because of their willingnes to work and save. Im Norwegian, I get money from the state for doing absolutely nothing else that saying I have mental Issues, which I do, Im reduced to a fucking pulp by my own government, because we don't see eye to eye. Am I a free man? Have I helped anyone? Do I really get help by getting money, or am I just making a point and doing the rest of us worse in the short term, and hopefully better for the long term. Just say you have mental illness. Who can, really, tell what the difference is when every other bullshit pronoun or mental unstability is to be taken serious. We are, in a very serious fact, going downhill, and I see my part in it aswell, but I will not leave my life to benefit others who cannot think for themselves.
Thank you LibertyPen, I really like Milton Friedman's explanations. He is much better type of lecturer that Tom Woods who seem to politicize it too much.
Freedom means different things to different people. For me, freedom is how much resources one has available to pursue what one desires. Freedom is not "less laws"---less regulation would often reduce freedom. At a personal level freedom is also ability to pursue one's "truest" goals (i.e., ability to get rid of what one considers bad habits).
Yeah, well, I played him. He yelled that the free market has prevented monopoly and flipped the board over after I bought houses on boardwalk and park place.
Milton Friedman forgot one thing in international trade . That is inequality of economy between the states. In my country when we entered into EU economy started to collapse even for agrcultural sector. For example, when borders become open for trade cheap products like milk and oranges from other countries came to country because the sellers had a freedom and intrests to chose cheaper and their(foregin) farmers have big subventions and in that order they can produce cheaper and in big quantities. Those season people lost their jobs, milk was splited, entire dumpsters had been filled with oranges after one year or less, sellers also get in to the bankruptcy and their conglomerate sellers took over the market. Buying power and standard of living was downgraded and shortly after that we faced with inflation and it was become too expensive but necessary. They have foregin monopoly and services went bad. In case of the food they selling low quality and suspicious content products because they are trough goverment closed sanitary and health inspection for the food, now people often get sick because food poisoning. Freedom isn't anarchy. If you have market anarchy other state will colonise and conquer you without single bullet on easy way and your society will be exploited.
The only issue is if someone establishes themselves as a monopoly, then starts to raise prices and competition comes in, the large monopoly can afford to lower their costs even lower than what the competition was at until they dry up, then raise them back high again. It depends how often new competition enters the market though, but this could still be an issue.
This is one of Friedman's ideas that aged worse. He was mostly right up to his point, but the digital revolution brought a lot of new monopolies or oligopolies. If your product has negligible variable cost and all the cost is fixed cost (research, writing code), like a search engine or an office package, a rich becomes richer system cannot be avoided. You can have a monopoly or a couple of competitors, but that market will steer far from a perfect market. And when you add network externalities and/or you go to vertically integrated systems, like Google using his monopoly in Search engines to push his monopoly on email, the only saving grace is the fact that technology changes so rapidly that the competition is between markets itself: emails disappear while communication moves to instant messages, laptop lose markets to smartphones. It is difficult to realize that the smartphone has just a dozen years. But when the winners in any rising market gets bought by incumbents in previous markets (CZcams, Whatsapp, Instagram,...), the situation is far from perfect competition and potentially dramatic.
Let me explain. The 2 monopolies that were there without government intervention arent real monopolies, because no one is barred from competiting with them, but they are maintained, because thwre was no demand for more, and when you see no huge price gouging, i see no peoblem. The consumers are willing to pay, so it is obviously worth it to them.
In this situation I would ask him about Standard Oil, where the government did intervene, and whether he thinks it would have broken up without state intervention.
Global monopolies would be EXTREMELY unlikely because of location costs. A monopoly in China from America, would be less likely and have less influence than a Chinese stationed monopoly.
@@sandwitht6264 While it's true that Google is somewhat of a monopoly it's not in the traditional sense. For now, google simply offers the best service at a low cost and there are viable alternatives like duckduckgo in the search engine department, and in the other sectors, there is competition as well.
Freidman's ideologies are almost perfect in the sense of unregulated free market economy being the best solution for a society to base itself on. However, there is always the ever present aspect of Greed and corruption of the individual and the corporation. With that being said a free economy is still the best solution to have, in the sense that it gives everyone a chance to make a profitable living. Adaptation is the key to survival.
"Land monopoly is not the only monopoly, but it is by far the greatest of monopolies - it is a perpetual monopoly, and it is the mother of all other forms of monopoly." - Winston Churchill
I watched a few of Milton's clips and I've come to realize, the economic issues, theories, and debates we are having today have been had over and over and over again for the past 100 years... with the same language and with the same arguments... so how come we still can't tell which is correct? is it because this tension between the two opposing theories of big govt and no govt, free market and regulated market, is keeping us grounded in the middle where things work best? surely if one system is better than the other it would have prevailed, or if one is worse than the other it would have failed spectacularly.
Yeah I see that too. It is apparent that what we today across almost all countries in the world is a form of 'mixed/semi-regulated economy' due to a constant fight between the State and the Capitalists! Some free-marketers [Russ Roberts et al] even talk of a 'emergent order', wherein the State itself is considered as a contributor to competition, leading to the emergence of this mixed/centrist state!
I see your Point, but if you compare standard of living all over the world it appears that the more government intervention, the Higher the living standards are (Nordic countries beeing at the top, followed by middle european countries and canada followed by other european countries and the US.). Also, there is a big difference between happiness& living standards and "the Economy". While it is still widely known, that the US economy is the best/very favourable for companies and entrepreneurs/rich people (With the US government intervening a lot less in comparison), the whole population does seem to benefit much more from more government intervention, even if it damages the efficiency of the economy.
@@t.rebentisch2777 That's not entirely correct since countries such as The Netherlands also have high standards of living with lower government intervention and Russia or China in which the state heavily controlling the economy, have lower standards of living. It seems to me that it isn't so simple as state vs market and that there are factors such as corruption, financial stability (both private and governmental) and how wealthy the citizens are that have a bigger effect rather than economic theory.
It's because the root cause of monopolism is in our nature as INDIVIDUAL living beings - it's survival of the fittest by any means available that is the culprit. Monopolists benefit at the cost of others and have nor morals or ethics that hold them back. Adam Smith described it like this, 250 years ago (which increases your time span by 150 years and if you were to study history you'd find that this very same problem existed in Rome already, 2000 years ago). Anyhow, here is Adam (Wealth of Nations): _"The interest of the dealers [referring to stock owners, manufacturers, and merchants.. anyone really], however, in any particular branch of trade or manufacture, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens."_ & _"The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."_
I like the theory too. It is simple and seductive but impossible to test. The reality is that we have to deal with natural monopolies, network effects, trusts and anti-competitive behavior, tragedies of the commons, game theory, externalities, public goods/bads, not to mention human morality, psychology, corruptibility, religion, politics, etc. In a messy world it is the intelligent design and application of regulations that enables and promotes open and competitive markets on a sustained basis.
Ok genius why don't you explain the best law a NATION can pass to best prevent monopolies. It sure can prevent them internally as companies within the country's bounds are bound by that law. But what country can pass a law to prevent monopolies in global trade? Hell, if every country got rid of tariffs and allowed free trade then even if a large company took a majority market share they would still have to be best at meeting consumer needs or otherwise lose sales. As for companies that have monopoly through control of resources on a global scale, such as oil, that is what wars are fought over. Instead of complaining about the genius Milton Friedman about a question that wasn't asked to him, why don't you try using your brain towards a more productive end.
Martin - Do you understand free trade ? You practically answer the question. In free trade one of the best ways you get rid of competitive barriers which is what you are referring too. Innovation through technology. For example- Blockbuster if you recall rented movies, games etc. They controlled most of the market share for quite along time. What happened to them ? NETFLIX. New innovations practically got rid of Blockbuster. Streaming, New Social engineering in terms of entertainment like Facebook, Instagram, force a new creation of entertainment. The internet took off around the time. Milton Friedman didn’t tell you this because this is economics 101. You are supposed to know this already.
@mikerowphone In the case of the telecomms, gov't intervention applies various regulations including determining right of way for their infrastructure, price ceilings, taxes, wage laws, various measures intended to ensure businesses don't fail. All of those are manifested as barriers to entry. Often, they are supported by the businesses. Plenty of big businesses have profited off of intervention, don't be mistaken on that (Keynesian intervention inherently *aims* to increase profits).
The "invisible hand" channels self-interest in such a way that, by seeking one's own ends, one meets the needs of others because the surest means of improving one's own lot is to meet the needs of consumers. Demonstrably this has contributed massively to prosperity and, ultimately, created a level of prosperity that has allowed the diminution of child labor, concern for the environmnet, etc. It is tremendously stable. In fact, instability is caused by government intervention for centuries.
All monopolies come from government when China had companies which were backed by government then monopolies existed and the market suffered. The Chinese learned this and so stopped backing companies and let other companies enter the market, which has led to Chinas rapidly growing economy.
Of course that is not true. Chinese govt has simply changed the way they back their enterprises and are in fact utilizing govt enterprise to buy up resources, companies and assert all sorts of influence across global markets
He said the FED should have released money at a lower rate from the central bank. Stimulating the economy. The government did nothing. This is certainly not a free market viewpoint. So Friedman believes that the FED should leave the market alone apart from when its better if they intervene. Wow what a pioneer of a true free market system.
Can someone explain me how letting in foreign competition doesn't lead to the forming of mega multinational companies like nestle, monstanto Google ecc to take control of the market, or how it prevents already existing monster companies like those to just step and do the same?
I think it's the same. Big corporations lobbying politicians to pass the laws that are useful to them. So to demonopolize corporations, deregulations are needed to remove privileges. But that does not solve the problem from the roots. Corporations lobby, because government can provide required laws. The less power government has to influence laws the less incentive is to try to lobby. And in truly free market monopolies are not that bad, because to be monopoly business has to provide the best service/product available. As soon as better product/service appears, monopoly will start to loose its market share.
@@edmundas919 It's a bit of an issue if your company is so huge as to just gobble up any new invention that either will threaten your market and just assimilating it into your own system. 99% of people with great inventions wouldn't say no to $20 million and a crapton of shares when presented with that. So the government still would have to intervene if a company controls 70%+ of the market over a very prolonged amount of time, unless of course copyright and innovation laws are rewritten, which especially the tech sector is in dire need of.
Health insurance companies have monopolies because they cannot compete across state lines. Pharmaceuticals don't compete because we cannot buy cheaper or more effective drugs from overseas. The AMA uses a license system to keep a shortage of doctors so that the price remains higher than they typically would. Those are about 3/4 of the problem we face with rising health care costs. It's all because the government intervened, and to argue that it's because the government does not enough is flawed.
@ynotfsu I agree with you that liberty and freedom should be strived for. Hitler didn't promote tyranny either. He wanted to rebuild Germany. The majority of Germans didn't see Hitler as a dictator, they saw him as a leader, and a strong figure in times of economic depression. The fact that you can't guarantee that people are better off with the libertarian model, will make people resist it. I do agree with you, I just tend to scrutinize "perfect" ideologies.
Still, some points are valid. The only points that aren't valid anymore are the two firms he thought were monopolies without government intervention. Many have already noted DeBeers involvement with governments. As for the NYSE, there is NASDAQ and S&P 500. #Competition
For a Libertarian, life is like a competition TV show where all the contestants are given the same resources, the same tools, and the same directive: produce something of value that people want to buy. Bang-timer goes off and it's the best product or the best couple of products that win. Simple enough. But what the real story is more like is you have all of the resources and tools and a team of 100 as Team A and Teams B, C, and D each have about $1.50 and a good pair of sneakers. Bang the timer goes off and Teams B C and D have to book to the store (owned by Team A) , purchase the materials (also owned by Team A) and get back to the competition to produce a single widget while Team A has produced a warehouse full. But it doesn't stop there. You see, Team A gets to assign one guy to watch the other teams. So when their widget comes out (late and made with Team A's resources), that one guy just tells Team A what's up and before Teams B, C, and D can sell their second widget, TEam A has another warehouse right next door with a crappy, but similar widget for free. That's the free market for you. The only way the idealistic Libertarian free market works is if all people have the same access to the same resources at the same time. Libertarians have created this philosophy in a vacuum and I am sure 60 years ago (or whenever this privliged white dude gave this ridiculous speech), there were no natural monopolies. Today it's not that easy.
Friedman's tactic allows an even bigger, Multinational monopoly to come in and crush domestic products. Economists like him have merits, but they do love living in a vacuum most of the time.
A good argument I have to admit. But it assumes that everybody is going to make the same product, when life and society is so complex that no corporation is omnipresent and omnipotent that absolutely no one cannot come up with innovations and ideas in other domains that existing corporations have specialization in.
@ElJefer I don't mean monopoly in the sense that they are the only players in the market. I'm talking about companies that are big enough to distort the level playing field.
The key to corporate monopolies is unlimited free money. The Federal Reserve is a printing press. The government has access to that press. Big corporations have access to the government. That is all you need to know. Walmart does not need to make a profit in those small towns. It can get unlimited help from the government if it needs it. Once the competition is gone, the shops will make money. 0%-1% rates help too. As Friedman says monopolies begin with the state.
What about microsoft? This monopoly was created not by the government intervention, but by the natural tendency of capitalism: the concentration and centralization of capitalism.
Josafat Hernández What monopoly? You can choose another OS if you like. The fact that the best value choice naturally becomes the largest supplier in a free market is not the same thing as monopoly.
***** True monopolies should scare you. They only happen when government uses force to prevent competitors starting up, like most utilities and pre-cellphone telecoms were. True monopoly prices always drift upwards because there is no competition to hold them down, so government usually also creates regulators to monitor and approve prices. That kind of heavy gov oversight always stifles innovation and progress.
He contradicts himself and he just refuted his own argument. He implies that without international competition, domestic monopolies would become a problem, since international competition is his _solution_ to the _problem_ of domestic monopolies. He gives no reason as to why increasing the _size_ of the market solves the problem of _monopolies_. If monopolies can form in the already quite large _domestic_ market, why can't they form on the _global_ market? Is he admitting that eliminating tariffs would only slow the problem down? What happens when a domestic monopoly and a foreign monopoly both realize that they stand to make _more_ money by creating a merger, and then charging whatever they want as a _global monopoly_?
Because the only way you CAN'T have international trade is if the government limits trade, so he doesn't contradict himself at all. His premise doesnt change, government intervention causes monopolies.
Because the only way you CAN'T have international trade is if the government limits trade, so he doesn't contradict himself at all. His premise doesnt change, government intervention causes monopolies.
@Molo9000 the railroads still have to be maintained, and the train is a service, which means that the customer has to be satisfied with that service if the business is to be successful. If the already-established railroad company is doing a bad job in service, or is overpricing the tickets, then a new company will compete with them and take them over. We need that competition to ensure that the railroad companie(s) expand and stay/become more efficient.
It is correct that Alan Greenspan believed in deregulated free markets. However, free market was not the cause of the the finacial meltdown. It was once again governement interferance. The government subsidized real estate loans in the market which lowered the risk which caused an artificial market to be created. The rising prices encouraged more malinvestment, along with the bailouts. I dont totally agree with milton friedman but he was right about governement interference in this case
Main goal of capitalist is to cumulate capital. Common sense in that case is not willingly endanger yourself with the treat of competition, as easiest and most lasting/secure way of cumulating capital is by setting a monopol. Monopol is build into very foundation of capitalism. It can be set with the help of goverment, but if there is no goverment, rather anarchocapitalism (with no govermental monopol on violence), goverment regulations are replaced by private police forces, mafia, gangs etc. Libertarian mythical dream is no market regulation and national monopol on violence to protect free market, but this just imply that people holding iron fist should not belive in capitalism witch primary goal is to cumulating capital, because if they do...they will just take the money and beat the hell out of competition, without the hassle of regulations. Corporationism/Plutocracy is natural development stadium of libertarian capitalist ideology. To overcome this problem, there is necessity for stronger belief in social contract(morality:freedom of market, respect for human rights etc) than in cumulating capital. Nordic countries have succeded merging free market economy with strong social contract by adapting extednded wellfare funded by high taxes. How is possible their economy is not collapsing but flourish? They have least goverment corruption in whole world and thanks to this, handle wellfare efficently. They truely belive in their system, they are proud of their nations achivements, they care for other people and they all are beneficients of this system so they know it works good. But how they did it? Big taxation just magically deosn't end corruption. How they menaged to achive such high mutual respect for each other? Capitalism poster girl - Ayn Rand teaches that selfishness is a virtue, by being ass h for others, magically they will be better off, Nords have it upwards - if you will be nice for others, it will be better for yourself. And there is some hard data on this in the fields of psychology, sociology and even economics (as Nordic countries clearly shows).
You make it sound like welfare state makes the overall economy stronger. That's wrong, countries implementing welfare can only afford that because they have strong economies. I'm not sure what your last point means. Ayn Rand primarily advocated recognizing and respecting the rights of other people.
What I meant is experimental data support the view that egoism is not mutually beneficial, either psychologically or economically. Libertarian capitalism by recognising extreme indywidualism and egoism as virtues, destroys incentives to sustain it's own ideology - free market. Welfare state, if forced, not welcome and understood will fail equally as libertarianism is failing now. It will rot from inside by corruption of people not respecting its assumptions. What make's it different is if already properly placed, creates enviroment that self sustain it's assumptions, people see benefits of the system, they are encouraged to take actions that actually support both the system and themeselves (either psychologically or financially). But can it make economy stonger? Well there isn't enough data to claim anything. Sadly, if taken into accout Europe and US colonial and neo-colonial on-going looting, we cannot even say we have reliable data that can say something about capitalism. At least not including war crimes in it's definition. Soon there will start few basic income experimenst in Europe, but their results are endangered by massive refugee crisis going on right now.
Phi1eap You seem to be saying the welfare state would work fine if the people stopped acting like human beings and just supported it. Well, I guess that is the same for any system.
***** I agree with your post, except for your last sentence. I believe it is not the fault of those who have been slowly guided into dependency. They are, to some extent, victims of a type of repression disguised as benevolence.
Monopolies aren't created by government intevention. They are the natural result of takeovers and mergers happening between corporations. Smaller corporations are either taken over, or are unable to compete with the mega-corporations due to inefficiency of scale.
You are viewing all types of monopoly as bad for the consumer. But in fact there are two types of monopoly... (A) Protected monopoly (bad for consumers) exists only if competition is prevented by government. (B) Free market monopoly can happen only if one producer sells product cheaper than anyone else can (good for consumers). That should be encouraged. That type of monopoly will also automatically lose market share if they ever try raising prices (profiteering), and so does not need state control. Its very unfortunate we use the same word for both.
Mike Blain That's simply not true. Lets say two companies compete in a free market, wih no government control, providing a single product. it would be a natural choice to merge so they could put up their prices. Or form a cartel for price fixing. And any other companies who entered the market could be bought out, or brought into the cartel. This has happened time and time again. Thats why so many mergers occur. If anything goverments try to stop it. There have been many cases of mergers and cartels that have been found to be illegal.
julesdlush First, your "single product" example is just not reality. Customers always have a choice of some alternative. Second, a producer would have to bid high enough to buy out every competitor startup, and so will become less profitable anyway, so it would gradually become even easier for new startups to enter the uncompetitive field. Over-charging can only be temporary in a free market, but can last for many years when it is government protected. Good example in the US is airlines which were increasingly more regulated (restricted entry) for decades, until deregulation began in 1978 allowing prices to fall for consumers as the market became more free.
Mike Blain So all those mergers and aquisitions must be my imagination right? The less companies competing means less competition. And you haven't addressed cartels. And airlines are still regulated like everything else. Still believe what you like, a lot of laws protect consumers in my country.
julesdlush Obviously mergers happen, but they don't effect real competition. If, in the end, there is only a single supplier of some specific product, they still have real competition, against any similar products, or against new startups. Cartels are no different in principle than mergers, but are less stable because members can defect (as OPEC members often do by boosting production volume) The US airline deregulation in 1978 was obviously not safety regs (which are still in place). It was the government (CAB) preventing new routes, and preventing discounted tickets. Yes, airlines were actually getting fined for offering "secret" discounts. How is that protecting the consumer? They were even prevented from offering perks, like better meals. *The government were protecting the existing airlines from having to compete.* For consumers, a price fixing arrangement with government like that is more scary that any arrangement between businesses, because business cannot enforce price fixing like govmt can. I'm glad you feel consumers are protected in your country. But in the US and Europe, the main law they use is antitrust, which usually works against consumer interest, to protect the weaker less efficient competitors.
Dear American Friedman fans, I've got a question: Friedman said that the railway industry was doing so bad in the USA because of the ICC. Since the ICC was largely abolished in the 1980s and dissolved in 1996, how is the situation today? Has it improved? If not, why? thanks :)
+GodfatherCorleone77 Didn't he say the opposite? He said the railway industry only became a monopoly because if the ICC - the point being that monopolies are more likely to be created because of government intervention; and without said intervention, they "fall into pieces". So Friedman was basically correct.
Alan Greenspan loved Milton Friedman and was a minarchist at heart...and look how that ended up, with a global financial crisis. The problem with Friedman's ideas are that, for all the irony of his criticism of socialism, they are too utopian. Monopolies and exploitation in capitalist markets are inevitable, because you make more profit if you merge, exploit and reduce your competition by merging with it, leaving the consumer with less choice.
This is where libertarianism just breaks down into a million pieces. Monopolies are just a natural part of capitalism regardless of the size of the market, national or otherwise. Companies will just combine to form one large mega company that will eventually make free markets impossible. This has already happened in this country (USA) with steel, oil, and railroads, telecommunications, tv, radio, and retail sales.. Now we're seeing it with banks and there ultimate governmental deregulation. Some have been previously broken up, but most just form back together when they have successfully bribed the government into allowing the mergers. Pretty soon there will be no choice at all and the government will be forced to either break the monopoly (not likely anymore, too much corruption) or enforce them (more likely, that's where the money is). Luckily, for now at least the people have the internet. How long will that stay open and free though??? Also foreign competition may have an agenda that does not align with a country's cultural values. Which is another topic.
What precicely will this "one large mega company" produce? Why can't I produce it better? Why can't I produce something that makes the other company irrelevant? What is stopping you from entering a market and innovating? What are the barriers to trade?
In the true sense of the word monopolies can't exist. Every big company can be taken dn by a small company. Ex Kmart was once tiny took sears marketshare. Walmart was once small took kmarts. Amazon was once small. Now the biggest biz in the world. If monopolies existed in the true sense of the word you would go to Walmart and buy toothpaste and they would force you to pay 100.00. Bigger companies drive dn prices.
There's always the story of the big company coming in and taking biz from the small corner store. The small corner store is run out of business bcos of lower prices. Who's buying products from the bigger store? Everyone. Or else the big store wouldn't have any biz. Everyone is saving money at the expense of the small guys loss. It's self interest. The small store is against greater skill.
Well, you can survive as a small corner store. Mind you that the main advantage of the corner store is accessibility and convenience. You are coming tired from work, you dont wanna lose time entering a big hypermarket, then in line to pay up. A small corner store is more time efficient and when your store has the basics at a low price, you turn profit by the quantity of sales.
+Stephen Dearden "Monopolies are just a natural part of capitalism regardless of the size of the market, national or otherwise." This is a gigantic fucking axiom you've set up that you then didn't back up at all. Did it ever occur to you that you need to explain *why* this is true and how you reasoned it out? Not only to us but yourself as well. Folks this is one of those famous "blank outs" that Ayn Rand describes.
You have comfortably sidetracked the questions I asked like sustainability. Anyway, the fact is that there has never been in history free markets of the kind you recommend, and that's because of a reason. "The better the outcomes"---we're expected to take what free marketeers say on face value? And yes, of course, free markets do not exist---it is the government's decisions that exist. Concept of "Free market" is a tool used to implement socialism for the rich and capitalism for the poor.
Though I typically agree with him, it's naive of Friedman to not see the lack of nationalism in his answer, and the consequences of playing by those rules... especially when other nations play a much dirtier game, giving their like kind competitors a leg up to the detriment of Americans.
First off, the type of security offered under a regime where your rights can be violated at any time without due process is not what I would call security, it's tyranny. Second, innovation is not simply about the accumulation of wealth. Rather, its the idea that I determine my own self worth based on what I am willing to contribute to society, without interference from government.
@asleeperj big companies buy smaller companies, or lead them to bankrupcy, becoming the only option for the consumer. Also, competitive companies can also set equal prices to their products and create an oligopoly.
Milton believed that the Federal Reserve should be a mechanism in which money creation would be tied to production. His primary error was in not recognizing the potential and likelihood for "arbitrary" money creation. Later in life, he agreed that the FED was clearly a net evil and needed to be abolished. Milton lived in the realm of reason, unafraid to have his ideas confronted. As a result, he pursued truth rather than hold to a viewpoint that flew in the face of compelling evidence.
@ecalebw Friedman simply advocated economic liberty. He did not seek a total divorce of man from any social contracts. He just wanted to divorce government. In a free society, people are free to establish any foundations they wish and make any social contract they wish. The only problem is, they really think the project is worthy enough to voluntary contribute to it rather than use the force of government. Your problem is not with Friedman, it is with concept of individual liberty itself.
It is precisely the rules and regulations that allow parties to pursue their own interest efficiently. They have security, fairness, legal tender, access to labor, etc.
But history shows (in the two cases Std Oil & Alcoa) that they DID keep prices low. Industry is not as simple as you think, even when there is high-barrier-to-entry. Alcoa brought down market price to only a few percent of the price 50yrs prior. Suddenly it was in competition with other cheap materials in 1940s like steel, bakelite, porcelain. They were not just competing against a potential Alcoa clone startup. Secondly, they also had the risk of imported aluminum if they raised prices.
The difference between existence of "free markets" and freedom is that freedom is a meaningful concept for an individual, but free market is courtesy a government. And this really negates the existence of "free markets".
What you describe is a common fear, usually promoting antitrust laws. In the real world, it does not happen. Big companies working within the competitive market place usually keep prices low enough to not allow competitors to enter. Its in the business interests, and the consumer's. Examples are Standard Oil in the 1800s, ALCOA in the 1930s. Because those companies were so efficient, they won high market share using low consumer prices (and ironically were punished for it using antitrust)
I don't think Friedman was thinking about the large, multi-national monopolies that can exist today. We've tried his 'free trade' and we watched our jobs and standard of living leave the country. Conservatives up to Herbert Hoover believed in tariffs and using them to protect the American standard of living. We did quite well when we operated like that. The only reason for the Great Depression was the aftermath of WWI (International turmoil that we participated in) and mismanagement of our money supply.
Actually, he said, the '29 stock crash resulted in a recession that became a depression because the federal reserve actively cut the money supply by 1/3, not entirely related to the short term fed funds rate. He position was GIVEN that the central bank existed, then it became necessary to act - which is why he was against the fed towards the end of his life, he thought it was unfixable.
If the kid's suggestion was implemented, profit signals in the price system would have limited power. There are very bright people who make enormous profits off detecting a societal demand and serving that demand. If you put a cap on the level of profit he can make, you slow down the speed at which production of a good or service whose price has fluctuated, the profit signal, will adjust with respect to that fluctuation. This dampens growth overall. Not only this crucial fact, but there is
(3) Not only is that good for consumers, but the absence of competitive markets frees capital for other goods and services. This results in less bloat in the economy and more variation in specialization, leading to more product monopolies, leading to a higher standard of living.
That is a very good question: people prefer comfortable lies to the hard truth. And politicians are very good at telling comfortable lies. In the words of Thomas Sowell, “When you want to help people, you tell them the truth. When you want to help yourself, you tell them what they want to hear.”
Ok. Someone who's thinking. You are correct in understanding that free trade does require individual freedom possible only by rights protection. That is the role of government and should be the only role. Economic regulations should not be on its job description. Interestingly, Milton's son David Friedman has an excellent case for privatizing even Law itself using competing rights protecting agencies.
Friedman explained it quite frankly, "the public at large gets what they want," and while they support limited government and competitive markets in general, they oppose it in PARTICULAR.
It is actually very hard to hold a monopoly. The bigger you get, the less flexible you become. Even though you may have a huge pool of wealth and technology at your disposal, it is very hard to adapt as there are so many management levels you have to go through to get permission to do anything. The best example is A&P groceries. It had a huge monopoly on groceries, but in a matter of a decade, they were destroyed by smaller stores that were flexible.
@lachylolHamish You can't keep buying out competitors unless people value your product enough to enable you to do so. Also, you seem to ignore the fact that many products can be substituted for one another (there are many types of food, etc) and that other factors like technology can favour new companies as much as existing ones.
Agreed, separating economic and political power is key but that does not imply laissez faire/no regulations.Individual corporations do not naturally want to compete fairly. There are more gains to be had from rent seeking, exploitation, graft, etc than competing fairly, which is hard work. To keep corporations/economic power in check and in a lasting state of efficient competition requires smart regulation that evolves with the economy/society/technology.
I agree that affirmative action, equal pay and such laws are misguided and address symptoms not the root cause of declining social mobility in the U.S. Rather the focus should be on equal opportunity (education, health, infrastructure) to increase broad based productivity and mobility (i.e. poor getting rich and rich getting poor) and to not protect corporations and the rich from competition, ie, no monopolies/trusts, subsidies, trade protection, legal/regulatory/tax loopholes, etc.
That's what Friedman was talking about, most of them fail due to competition. The issue here with "doing something" is most likely government administrators will make matters worse - the history is there. NO ONE has been able to match that over 99% grade a competitive market brings. We actually have one now, because of the SEC.
To the contrary, even if coercion were not specifically excluded from the free market and subject to sanction, the incentives of the free market quickly punish those engaging in force or fraud (no one wishes to deal with them and they quickly find themselves unable to participate). The system all but eliminates such things in very short order because such activities are unsustainable.
@NietzscheanMan I don't understand your point. The Patent office is a part of the Dept. of Commerce. The Patent laws are federal and patents are registered federally even if enforcement happens at the state level.
Conceding the fact that, imho he was wrong on monetary policy, I will forever respect his ability to bring a widely misunderstood topic clarity for the masses. He may not have been the most brilliant economist to have ever lived, but his ability to deliver that kind of deep understanding to the masses was unparalleled. He brought me into the game at least.
You example may work, if their is only one other alternative and it is 10 times more expensive. You also have to have a situation where the monopoly actually occurs. There are a lot of qualifications to make it applicable. You don't see huge companies denying business to people by jacking up prices however. Microsoft got huge by doing business with almost everyone, just like Wal-Mart. That also meant they needed their products to be affordable for most people.
The trouble with those sorts of monopolies is that they thrive off of no-one else understanding their business, or even the 'language' they speak. Law the first is free trade, law the second is to make all companies accountable for any unclear communication to 'laypeople' in contracts, business, etc.
@bubba007ss Sorry, I should clarify one part of my last statement. Free trade over time in a perfect world will continuously cause the balance to shift between those who can figure out a way to deliver the product/service more economically or provide a better product/service for the same or lower price. The secret is in seeking to be the best, not the economic power.
@mikerowphone [Continued] Monopoly products must still compete If the demand is elastic, people will substitute other goods if the prices are too high. Furthermore, there are limits to the inelastic demands. Imagine if oil was suddenly $1m per barrel not because of supply/demand but because they wanted to increase their windfalls. At that point, demand would have to drop off (until the resulting World War III was over and oil production resumed)
You are right to not trust the regulation of the money supply. The verdict of history is clear, just some refuse to see it. I think the most compelling demolition of both the morality and efficacy of Keynesian theory is put forward in the classic novel, Atlas Shrugged. My guess is that you will also enjoy exploring the books of Tom Sowell. Basic Economics is a classic and the Quest for Cosmic Justice was particularly valuable in clarifying my inclinations about liberty and social planning.
Human beings are not suddenly made perfect by an economic system. "Criminal companies" are unbelievably rare. In fact, corporate scandals are so rare that when they happen (Enron, Wroldcom, etc.) they are newsworthy literally for YEARS while hundreds of thousands of companies in the US alone do their business every day without incident. Compare that to the scandal record of 535 members of Congress. And retirement delays stem from a government caused recession.
![Eminem - Houdini [Official Music Video]](http://i.ytimg.com/vi/22tVWwmTie8/mqdefault.jpg)
Didn't learn anything about the game though, but ok.
i gues u lerned something more important
You learnt about the game of life and economics my friend
the game was invented by a Georgist, called "The Landlords Game" before being change to Monopoly.
@@julsius RISK was far better game. 💃🗽💃
@@newjerusalem6604 its a risky business when rent-seeking begins to devour capitalism
I wish I only found out about Milton Friedman decades earlier in my life.
If Friedman has a Coursera or EdX, I quit my college and just enrolled in them.
Shaun's Collectibles that’s me!!
The problem is enterprise will naturally rise to influence political bodies. The free market has never existed because self interested market players will not allow it.
Shaun's Collectibles Same here.
Brian Chan If there are no laws to influence/bribe, then the free enterprise stands up to monopoly. Friedman’s argument is precisely that, less government = less monopoly, one of the reasons for less government/laws is it also reduces/eliminates corporate corruption. On a different topic, greed is good. Greed is what advanced the human civilization, for better or worse.
Milton was always smiling, polite and ready to teach - and that makes him such an easy guy to listen to and likeable even when you might disagree with him.
Ah yes what a nice guy, he even helped the Pinochet dictatorship with their economic system
@@serdirtbagoftheleft4045 he had nothing to do with the Pinochet dictatorship. One of the Chicago economists married a Chilean, he got a job at a university in Santiago and ended up teaching his ideas to a generation of Chilean economists who would later help Pinochet. No conspiracies.
Milton Friedman, come out of your grave!, I beg you! haha
he was not in grave for very long time but his ideas were never put in practice properly
Well I mean, the pragmatic neo-liberal reforms done in Chile from 1982-1994 were probably the closest thing to a pure version of Friedman's policies being carried out properly and that was a success. The policies pretty much continued past that point with a few small tweaks until 2013 when the Socialist party won an election and diverted the countries economic policies.
Even then, the countries that did adopt a good deal of his polices and stuck with them, benefited during the 90s and 2000s, even if they didn't follow them to the letter.
@godzilla poor pinochet worked so hard throwing communists out of helicopters, but the marxist poison infected his beloved chile anyway and is destroyed everything he worked so hard to build
somehow it's a coincidence that chile had had the greatest economy of any south american nation for so many decades while all the other ones choked on their own vomit under socialism like venezuela is doing right now. communist filth is the worst plague to ever darken the earth.
Martien de Jong Precisely the opposite. Natural capitalism is achieved without government intervention. The success of Latin American countries was not that the dictatorships forced it to be capitalist through certain policies but rather it got rid of policies and the government removed itself from the economy which resulted in it reverting to a free market.
Free market capitalism is closer to anarchism than authoritarianism because the more authoritarian the government becomes the less likely it is to be free. The free market arises out of natural cooperation between markets and businesses so no, free market cannot exist in dictatorships.
Al Iralev We need Uncle Miltie now more than ever!
Man, this guy has just got answers for everything. At every turn I go, he's got a free market solution for it.
That’s because the solutions are only in the free market. Government only creates problems.
note that the only two monopolies he cites that don't fit his theory have since lost their monopoly power. I guess he's right.
De Beers was one of his examples. The reason it does not fit into the standard model is that the customers for jewelry diamonds are not driven by the usual market forces. The customer is literally not looking for the best price, in fact paying more for an engagement ring only shows more (symbolic) commitment.
Mike Blain in any case, the De Beers monopoly has weakened a lot since he spoke.
There's NYSE Alternex and Nasdaq to compete with the NYSE right?
could diamonds be considered a giffen good ?!
Amir Rocketcock Actually your example shows that a free market always makes workers more free by allowing different companies to compete for more humane working environments. One example is Henry Ford who raised his wages to levels that other companies couldn't compete with. Therefore he prospered and received all the talented employees. He didn't raise the wage because of some minimum wage law but rather he did it to compete against rival automakers.
Remember the good old times, when students let the professor talk and did not yell and shriek and were mentally stable without triggering? Awesome times...
I'm guessing you're a 20-something youngster who never lived through the 1970s, am I correct? And you're fantasising about the past you never lived in, right?
Karl Quetzacoatl i think he was responding to the other guy, not sure tho cause i didnt understand your first comment lol
@Phineas Gage 100% true.
@@MrJason005 And I’m guessing you are one of the ones he mentioned who would “yell and shriek” when triggered by ideas other than your own, and/or anything mildly offensive, bc you’re mentally unstable and just generally love making those around you miserable, am I correct? And you're fantasizing that you’re _NOT,_ right?
such a dumb comment... when was the last time you were in a lecture hall? boomer
Under Capitalism, monopolies can form, but they take a long time to do so. Socialism and Communism, a monopoly is already built into the system.
@A one legged man there is no such thing in this world "100% solution". You can only aspire to achieve something to great extent , not a full one. Thats why there's neither 100% capitalist state or 0% capitalist state.
man side not I dont think Google is really a great example of a possible monopoly, if you want a more likely example look to things like movie companies. Disney has slowly been buying out the market and crushing its competitors for years and the biggest reason why it has the best chance of being a monopoly is because of the upfront costs. A large upfront investment is usually enough to scare away new competition.
*although this still will probably never become a complete monopoly, it might though grow large enough to effect the market like one.
@@phillycheese1563 Disney are smart though. They buy subsidiary companies to create a "monopoly owned oligopoly" which is a fucking awesome concept but not a very good one for a competitive industry.
@@phillycheese1563 That is a good example but I think it is important to think over longer periods. 25 years ago Disney were actually in a relatively weak position. They made some very shrewd acquisitions, Marvel for example, which they raised the value of substantially by creating high quality movies for. So now they are in a strong position, but 25 years from now the very people who made the smart moves in the early 2000's will be gone, and there are no guarantees that those who replaced them will make the same smart moves, Star Wars for example seems a good acquisition, but they've not done as well with it as with Marvel. In addition, it is becoming cheaper and easier for small film companies to make higher quality content. Perhaps matching Disney in special effects is a long way off technologically for a small outfit, but story-driven, acting-driven productions are ever easier to do. We don't know where that will lead but I think Friedman is right even when it comes to Disney. One question I would pose is Amazon... what stops them becoming an effective global monopoly?
Andrew Fraser Sometimes competition comes from the most unlikely of places. I would wager 3D printing is the upcoming replacement to amazon if done properly. We’ll laugh at how we used to wait for things to be delivered to our door before we could use them.
it was this argument about monopoly that first got me to question what i had been programmed to beleive in school and actually learn about economics on my own. This man really opened up my eyes to what freedom means
I live in Canada. Thanks to governmental regulations, I have 2 airlines to choose from when it comes to flying domestically, I have 1 single company to choose from when it comes to trains, I have
5 mobile service providers to choose from (4 of which are owned by the same 2 companies). They fix prices, government makes it impossible to get new players into the game. These CEO's make their millions, these companies provide absolute horrible services at the absolute highest costs and I should believe that the Government is looking out for my best interests?
All in the name of ''the people and what they want''- while taking away any position anyone of us had prior so the rest can get what they want. People who are socialists are legally stealing other peoples goods, but they will always be criminals because of their golden ideology. One person cannot save the world, but he can help his neighbour. One group cannot save the world, but they can help other groups. One people cannot save the world, but they can help other people. When, exactly, did this get synonimous with stealing from people whom are more fortunate by no fault of their own, or because of their willingnes to work and save.
Im Norwegian, I get money from the state for doing absolutely nothing else that saying I have mental Issues, which I do, Im reduced to a fucking pulp by my own government, because we don't see eye to eye. Am I a free man? Have I helped anyone? Do I really get help by getting money, or am I just making a point and doing the rest of us worse in the short term, and hopefully better for the long term.
Just say you have mental illness. Who can, really, tell what the difference is when every other bullshit pronoun or mental unstability is to be taken serious.
We are, in a very serious fact, going downhill, and I see my part in it aswell, but I will not leave my life to benefit others who cannot think for themselves.
I've heard they're afraid that America will take over their economy and they want to protect Canadian jobs. Not good for the consumer.
Good empirical evidence, but neither theory nor practice usually work to convince statists. Sadly etatism is a cult.
At 1:41 Friedman looks so giddy. The man loves his free markets.
Friedman schooling a young Bill Gates
Steve Jobs you misspelled
Thank you LibertyPen, I really like Milton Friedman's explanations. He is much better type of lecturer that Tom Woods who seem to politicize it too much.
Id love to hear Milton's thoughts on the internet tech monopolies.
Monopoly is a fallacy. Governments create and created them
Would love to hear his take or Sowells take on companies like Google,Facebook ,Amazon,Twitter,Amazon and Microsoft.
@@dupersdelite Serious question here: What was the government's involvement in propping up the google and facebook monopoly on social media?
Brilliant questions that I’d love answers to dear friends^^
@@dupersdelite so are you saying Autodesk is owned by the US Federal government?
Freedom means different things to different people. For me, freedom is how much resources one has available to pursue what one desires. Freedom is not "less laws"---less regulation would often reduce freedom. At a personal level freedom is also ability to pursue one's "truest" goals (i.e., ability to get rid of what one considers bad habits).
"So I think the answer to your question, and you and I have the same objective here, is less government intervention not more." - Milton Friedman
Dr.Friedman must have been a hell of a monopoly player.
Yeah, well, I played him. He yelled that the free market has prevented monopoly and flipped the board over after I bought houses on boardwalk and park place.
43 third-world monopolists disapprove.
yo milton be snapping yall...he be telling the truth
Zitlalit Rodriguez real talk
Zitlalit Rodriguez Were you dropped on your head as an infant?
Milton Friedman forgot one thing in international trade . That is inequality of economy between the states. In my country when we entered into EU economy started to collapse even for agrcultural sector. For example, when borders become open for trade cheap products like milk and oranges from other countries came to country because the sellers had a freedom and intrests to chose cheaper and their(foregin) farmers have big subventions and in that order they can produce cheaper and in big quantities. Those season people lost their jobs, milk was splited, entire dumpsters had been filled with oranges after one year or less, sellers also get in to the bankruptcy and their conglomerate sellers took over the market. Buying power and standard of living was downgraded and shortly after that we faced with inflation and it was become too expensive but necessary. They have foregin monopoly and services went bad. In case of the food they selling low quality and suspicious content products because they are trough goverment closed sanitary and health inspection for the food, now people often get sick because food poisoning. Freedom isn't anarchy. If you have market anarchy other state will colonise and conquer you without single bullet on easy way and your society will be exploited.
We need him now...
The only issue is if someone establishes themselves as a monopoly, then starts to raise prices and competition comes in, the large monopoly can afford to lower their costs even lower than what the competition was at until they dry up, then raise them back high again.
It depends how often new competition enters the market though, but this could still be an issue.
this is what amazon have been doing, and walmart
This is one of Friedman's ideas that aged worse. He was mostly right up to his point, but the digital revolution brought a lot of new monopolies or oligopolies. If your product has negligible variable cost and all the cost is fixed cost (research, writing code), like a search engine or an office package, a rich becomes richer system cannot be avoided. You can have a monopoly or a couple of competitors, but that market will steer far from a perfect market.
And when you add network externalities and/or you go to vertically integrated systems, like Google using his monopoly in Search engines to push his monopoly on email, the only saving grace is the fact that technology changes so rapidly that the competition is between markets itself: emails disappear while communication moves to instant messages, laptop lose markets to smartphones. It is difficult to realize that the smartphone has just a dozen years. But when the winners in any rising market gets bought by incumbents in previous markets (CZcams, Whatsapp, Instagram,...), the situation is far from perfect competition and potentially dramatic.
Not monopolies whatsoever
I love that little sound when the pen pops up
This is one of the best videos I have ever seen!
I wish every school in America required a course on Friedman and his revolutionary yet common sense theories.
Let me explain. The 2 monopolies that were there without government intervention arent real monopolies, because no one is barred from competiting with them, but they are maintained, because thwre was no demand for more, and when you see no huge price gouging, i see no peoblem. The consumers are willing to pay, so it is obviously worth it to them.
In this situation I would ask him about Standard Oil, where the government did intervene, and whether he thinks it would have broken up without state intervention.
What about a global monopoly?
Global monopolies would be EXTREMELY unlikely because of location costs. A monopoly in China from America, would be less likely and have less influence than a Chinese stationed monopoly.
It would collapse on it's own size
@@walkerhaw600 it's not, sadly. take google for example, it is able to operate wherever it can, except china here it is blocked. but everywhere else.
@@sandwitht6264 Microsoft, Google, facebook, Luxottica , amazon, YKK, AB InBev... The list of monopolies goes on and on.
@@sandwitht6264 While it's true that Google is somewhat of a monopoly it's not in the traditional sense. For now, google simply offers the best service at a low cost and there are viable alternatives like duckduckgo in the search engine department, and in the other sectors, there is competition as well.
Such a brilliant man
Freidman's ideologies are almost perfect in the sense of unregulated free market economy being the best solution for a society to base itself on. However, there is always the ever present aspect of Greed and corruption of the individual and the corporation. With that being said a free economy is still the best solution to have, in the sense that it gives everyone a chance to make a profitable living. Adaptation is the key to survival.
"Land monopoly is not the only monopoly, but it is by far the greatest of monopolies - it is a perpetual monopoly, and it is the mother of all other forms of monopoly." - Winston Churchill
I wish I could hear his thoughts on utilities, power grid, nuclear power.
I watched a few of Milton's clips and I've come to realize, the economic issues, theories, and debates we are having today have been had over and over and over again for the past 100 years... with the same language and with the same arguments... so how come we still can't tell which is correct? is it because this tension between the two opposing theories of big govt and no govt, free market and regulated market, is keeping us grounded in the middle where things work best? surely if one system is better than the other it would have prevailed, or if one is worse than the other it would have failed spectacularly.
Yeah I see that too. It is apparent that what we today across almost all countries in the world is a form of 'mixed/semi-regulated economy' due to a constant fight between the State and the Capitalists! Some free-marketers [Russ Roberts et al] even talk of a 'emergent order', wherein the State itself is considered as a contributor to competition, leading to the emergence of this mixed/centrist state!
I see your Point, but if you compare standard of living all over the world it appears that the more government intervention, the Higher the living standards are (Nordic countries beeing at the top, followed by middle european countries and canada followed by other european countries and the US.).
Also, there is a big difference between happiness& living standards and "the Economy". While it is still widely known, that the US economy is the best/very favourable for companies and entrepreneurs/rich people (With the US government intervening a lot less in comparison), the whole population does seem to benefit much more from more government intervention, even if it damages the efficiency of the economy.
@@t.rebentisch2777 That's not entirely correct since countries such as The Netherlands also have high standards of living with lower government intervention and Russia or China in which the state heavily controlling the economy, have lower standards of living.
It seems to me that it isn't so simple as state vs market and that there are factors such as corruption, financial stability (both private and governmental) and how wealthy the citizens are that have a bigger effect rather than economic theory.
It's because the root cause of monopolism is in our nature as INDIVIDUAL living beings - it's survival of the fittest by any means available that is the culprit. Monopolists benefit at the cost of others and have nor morals or ethics that hold them back.
Adam Smith described it like this, 250 years ago (which increases your time span by 150 years and if you were to study history you'd find that this very same problem existed in Rome already, 2000 years ago).
Anyhow, here is Adam (Wealth of Nations):
_"The interest of the dealers [referring to stock owners, manufacturers, and merchants.. anyone really], however, in any particular branch of trade or manufacture, is always in some respects different from, and even opposite to, that of the public. To widen the market and to narrow the competition, is always the interest of the dealers. To widen the market may frequently be agreeable enough to the interest of the public; but to narrow the competition must always be against it, and can serve only to enable the dealers, by raising their profits above what they naturally would be, to levy, for their own benefit, an absurd tax upon the rest of their fellow-citizens."_
&
_"The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."_
I like the theory too. It is simple and seductive but impossible to test. The reality is that we have to deal with natural monopolies, network effects, trusts and anti-competitive behavior, tragedies of the commons, game theory, externalities, public goods/bads, not to mention human morality, psychology, corruptibility, religion, politics, etc. In a messy world it is the intelligent design and application of regulations that enables and promotes open and competitive markets on a sustained basis.
My favorite channel!
that freaked my mind
1:35 What about international monopoly? He was particular by stating "domestic monopoly".
Yeah this dude doesn’t really seek to find the answers. He instead just wants to persuade you to believe whatever ridiculousness he’s saying
THIS IS WHAT MAKES THEM UNSTOPPABLE..ONCE INTERNATIONAL BIGGER LOOP HOLES ARE AVAILABLE..
Ok genius why don't you explain the best law a NATION can pass to best prevent monopolies. It sure can prevent them internally as companies within the country's bounds are bound by that law. But what country can pass a law to prevent monopolies in global trade?
Hell, if every country got rid of tariffs and allowed free trade then even if a large company took a majority market share they would still have to be best at meeting consumer needs or otherwise lose sales.
As for companies that have monopoly through control of resources on a global scale, such as oil, that is what wars are fought over.
Instead of complaining about the genius Milton Friedman about a question that wasn't asked to him, why don't you try using your brain towards a more productive end.
@Karl Quetzacoatl Google, Microsoft, Amazon? The only reason they don't have monopolies in China is that China is very protective
Martin - Do you understand free trade ?
You practically answer the question. In free trade one of the best ways you get rid of competitive barriers which is what you are referring too. Innovation through technology.
For example- Blockbuster if you recall rented movies, games etc. They controlled most of the market share for quite along time. What happened to them ? NETFLIX.
New innovations practically got rid of Blockbuster. Streaming, New Social engineering in terms of entertainment like Facebook, Instagram, force a new creation of entertainment. The internet took off around the time.
Milton Friedman didn’t tell you this because this is economics 101. You are supposed to know this already.
@mikerowphone In the case of the telecomms, gov't intervention applies various regulations including determining right of way for their infrastructure, price ceilings, taxes, wage laws, various measures intended to ensure businesses don't fail. All of those are manifested as barriers to entry. Often, they are supported by the businesses. Plenty of big businesses have profited off of intervention, don't be mistaken on that (Keynesian intervention inherently *aims* to increase profits).
The "invisible hand" channels self-interest in such a way that, by seeking one's own ends, one meets the needs of others because the surest means of improving one's own lot is to meet the needs of consumers. Demonstrably this has contributed massively to prosperity and, ultimately, created a level of prosperity that has allowed the diminution of child labor, concern for the environmnet, etc. It is tremendously stable. In fact, instability is caused by government intervention for centuries.
All monopolies come from government when China had companies which were backed by government then monopolies existed and the market suffered. The Chinese learned this and so stopped backing companies and let other companies enter the market, which has led to Chinas rapidly growing economy.
Of course that is not true. Chinese govt has simply changed the way they back their enterprises and are in fact utilizing govt enterprise to buy up resources, companies and assert all sorts of influence across global markets
I wish I could have taken his class :(
Well that's a problem of wherever it has happened, I am talking about general economy, and the arguments presented in the video.
I love you Friedman.
wow Had mine question finnaly answerd
"You and I would."
Then you and I would BE the government.
He said the FED should have released money at a lower rate from the central bank. Stimulating the economy. The government did nothing. This is certainly not a free market viewpoint. So Friedman believes that the FED should leave the market alone apart from when its better if they intervene. Wow what a pioneer of a true free market system.
Can someone explain me how letting in foreign competition doesn't lead to the forming of mega multinational companies like nestle, monstanto Google ecc to take control of the market, or how it prevents already existing monster companies like those to just step and do the same?
what about the anti-trust laws, how could one demonopolize google or facebook?
I think it's the same. Big corporations lobbying politicians to pass the laws that are useful to them. So to demonopolize corporations, deregulations are needed to remove privileges. But that does not solve the problem from the roots. Corporations lobby, because government can provide required laws. The less power government has to influence laws the less incentive is to try to lobby. And in truly free market monopolies are not that bad, because to be monopoly business has to provide the best service/product available. As soon as better product/service appears, monopoly will start to loose its market share.
@@edmundas919 It's a bit of an issue if your company is so huge as to just gobble up any new invention that either will threaten your market and just assimilating it into your own system. 99% of people with great inventions wouldn't say no to $20 million and a crapton of shares when presented with that.
So the government still would have to intervene if a company controls 70%+ of the market over a very prolonged amount of time, unless of course copyright and innovation laws are rewritten, which especially the tech sector is in dire need of.
THIS IS WISDOM.
Health insurance companies have monopolies because they cannot compete across state lines. Pharmaceuticals don't compete because we cannot buy cheaper or more effective drugs from overseas. The AMA uses a license system to keep a shortage of doctors so that the price remains higher than they typically would. Those are about 3/4 of the problem we face with rising health care costs. It's all because the government intervened, and to argue that it's because the government does not enough is flawed.
@ynotfsu I agree with you that liberty and freedom should be strived for. Hitler didn't promote tyranny either. He wanted to rebuild Germany. The majority of Germans didn't see Hitler as a dictator, they saw him as a leader, and a strong figure in times of economic depression. The fact that you can't guarantee that people are better off with the libertarian model, will make people resist it. I do agree with you, I just tend to scrutinize "perfect" ideologies.
damn this video old af
Still, some points are valid. The only points that aren't valid anymore are the two firms he thought were monopolies without government intervention. Many have already noted DeBeers involvement with governments. As for the NYSE, there is NASDAQ and S&P 500. #Competition
*video's**
For a Libertarian, life is like a competition TV show where all the contestants are given the same resources, the same tools, and the same directive: produce something of value that people want to buy. Bang-timer goes off and it's the best product or the best couple of products that win. Simple enough. But what the real story is more like is you have all of the resources and tools and a team of 100 as Team A and Teams B, C, and D each have about $1.50 and a good pair of sneakers. Bang the timer goes off and Teams B C and D have to book to the store (owned by Team A) , purchase the materials (also owned by Team A) and get back to the competition to produce a single widget while Team A has produced a warehouse full. But it doesn't stop there. You see, Team A gets to assign one guy to watch the other teams. So when their widget comes out (late and made with Team A's resources), that one guy just tells Team A what's up and before Teams B, C, and D can sell their second widget, TEam A has another warehouse right next door with a crappy, but similar widget for free. That's the free market for you. The only way the idealistic Libertarian free market works is if all people have the same access to the same resources at the same time. Libertarians have created this philosophy in a vacuum and I am sure 60 years ago (or whenever this privliged white dude gave this ridiculous speech), there were no natural monopolies. Today it's not that easy.
Friedman's tactic allows an even bigger, Multinational monopoly to come in and crush domestic products. Economists like him have merits, but they do love living in a vacuum most of the time.
A good argument I have to admit. But it assumes that everybody is going to make the same product, when life and society is so complex that no corporation is omnipresent and omnipotent that absolutely no one cannot come up with innovations and ideas in other domains that existing corporations have specialization in.
@ElJefer I don't mean monopoly in the sense that they are the only players in the market. I'm talking about companies that are big enough to distort the level playing field.
The key to corporate monopolies is unlimited free money. The Federal Reserve is a printing press. The government has access to that press. Big corporations have access to the government.
That is all you need to know. Walmart does not need to make a profit in those small towns. It can get unlimited help from the government if it needs it. Once the competition is gone, the shops will make money.
0%-1% rates help too.
As Friedman says monopolies begin with the state.
What about microsoft? This monopoly was created not by the government intervention, but by the natural tendency of capitalism: the concentration and centralization of capitalism.
Josafat Hernández Microsoft? Monopoly? are you stuck in the nineties?
Josafat Hernández What monopoly? You can choose another OS if you like.
The fact that the best value choice naturally becomes the largest supplier in a free market is not the same thing as monopoly.
Microsoft monopoly was caused directly by govt intervention
+Josafat Hernández there's this thing called "intellectual property", i wonder if you've heard of it
*****
True monopolies should scare you. They only happen when government uses force to prevent competitors starting up, like most utilities and pre-cellphone telecoms were. True monopoly prices always drift upwards because there is no competition to hold them down, so government usually also creates regulators to monitor and approve prices. That kind of heavy gov oversight always stifles innovation and progress.
He contradicts himself and he just refuted his own argument.
He implies that without international competition, domestic monopolies would become a problem, since international competition is his _solution_ to the _problem_ of domestic monopolies.
He gives no reason as to why increasing the _size_ of the market solves the problem of _monopolies_. If monopolies can form in the already quite large _domestic_ market, why can't they form on the _global_ market?
Is he admitting that eliminating tariffs would only slow the problem down? What happens when a domestic monopoly and a foreign monopoly both realize that they stand to make _more_ money by creating a merger, and then charging whatever they want as a _global monopoly_?
Thought the same thing haha
Because the only way you CAN'T have international trade is if the government limits trade, so he doesn't contradict himself at all. His premise doesnt change, government intervention causes monopolies.
Because the only way you CAN'T have international trade is if the government limits trade, so he doesn't contradict himself at all. His premise doesnt change, government intervention causes monopolies.
@Molo9000 the railroads still have to be maintained, and the train is a service, which means that the customer has to be satisfied with that service if the business is to be successful. If the already-established railroad company is doing a bad job in service, or is overpricing the tickets, then a new company will compete with them and take them over. We need that competition to ensure that the railroad companie(s) expand and stay/become more efficient.
It is correct that Alan Greenspan believed in deregulated free markets. However, free market was not the cause of the the finacial meltdown. It was once again governement interferance. The government subsidized real estate loans in the market which lowered the risk which caused an artificial market to be created. The rising prices encouraged more malinvestment, along with the bailouts. I dont totally agree with milton friedman but he was right about governement interference in this case
Main goal of capitalist is to cumulate capital. Common sense in that case is not willingly endanger yourself with the treat of competition, as easiest and most lasting/secure way of cumulating capital is by setting a monopol. Monopol is build into very foundation of capitalism. It can be set with the help of goverment, but if there is no goverment, rather anarchocapitalism (with no govermental monopol on violence), goverment regulations are replaced by private police forces, mafia, gangs etc.
Libertarian mythical dream is no market regulation and national monopol on violence to protect free market, but this just imply that people holding iron fist should not belive in capitalism witch primary goal is to cumulating capital, because if they do...they will just take the money and beat the hell out of competition, without the hassle of regulations. Corporationism/Plutocracy is natural development stadium of libertarian capitalist ideology.
To overcome this problem, there is necessity for stronger belief in social contract(morality:freedom of market, respect for human rights etc) than in cumulating capital. Nordic countries have succeded merging free market economy with strong social contract by adapting extednded wellfare funded by high taxes.
How is possible their economy is not collapsing but flourish? They have least goverment corruption in whole world and thanks to this, handle wellfare efficently.
They truely belive in their system, they are proud of their nations achivements, they care for other people and they all are beneficients of this system so they know it works good.
But how they did it? Big taxation just magically deosn't end corruption. How they menaged to achive such high mutual respect for each other?
Capitalism poster girl - Ayn Rand teaches that selfishness is a virtue, by being ass h for others, magically they will be better off, Nords have it upwards - if you will be nice for others, it will be better for yourself. And there is some hard data on this in the fields of psychology, sociology and even economics (as Nordic countries clearly shows).
You make it sound like welfare state makes the overall economy stronger. That's wrong, countries implementing welfare can only afford that because they have strong economies.
I'm not sure what your last point means. Ayn Rand primarily advocated recognizing and respecting the rights of other people.
What I meant is experimental data support the view that egoism is not mutually beneficial, either psychologically or economically.
Libertarian capitalism by recognising extreme indywidualism and egoism as virtues, destroys incentives to sustain it's own ideology - free market.
Welfare state, if forced, not welcome and understood will fail equally as libertarianism is failing now. It will rot from inside by corruption of people not respecting its assumptions. What make's it different is if already properly placed, creates enviroment that self sustain it's assumptions, people see benefits of the system, they are encouraged to take actions that actually support both the system and themeselves (either psychologically or financially).
But can it make economy stonger? Well there isn't enough data to claim anything. Sadly, if taken into accout Europe and US colonial and neo-colonial on-going looting, we cannot even say we have reliable data that can say something about capitalism. At least not including war crimes in it's definition.
Soon there will start few basic income experimenst in Europe, but their results are endangered by massive refugee crisis going on right now.
Phi1eap
You seem to be saying the welfare state would work fine if the people stopped acting like human beings and just supported it. Well, I guess that is the same for any system.
On current trajectory sooner or later AI will replace us. But we have few options.
*****
I agree with your post, except for your last sentence. I believe it is not the fault of those who have been slowly guided into dependency. They are, to some extent, victims of a type of repression disguised as benevolence.
Monopolies aren't created by government intevention. They are the natural result of takeovers and mergers happening between corporations. Smaller corporations are either taken over, or are unable to compete with the mega-corporations due to inefficiency of scale.
You are viewing all types of monopoly as bad for the consumer. But in fact there are two types of monopoly...
(A) Protected monopoly (bad for consumers) exists only if competition is prevented by government.
(B) Free market monopoly can happen only if one producer sells product cheaper than anyone else can (good for consumers). That should be encouraged. That type of monopoly will also automatically lose market share if they ever try raising prices (profiteering), and so does not need state control.
Its very unfortunate we use the same word for both.
Mike Blain
That's simply not true. Lets say two companies compete in a free market, wih no government control, providing a single product. it would be a natural choice to merge so they could put up their prices. Or form a cartel for price fixing. And any other companies who entered the market could be bought out, or brought into the cartel. This has happened time and time again. Thats why so many mergers occur. If anything goverments try to stop it. There have been many cases of mergers and cartels that have been found to be illegal.
julesdlush
First, your "single product" example is just not reality. Customers always have a choice of some alternative.
Second, a producer would have to bid high enough to buy out every competitor startup, and so will become less profitable anyway, so it would gradually become even easier for new startups to enter the uncompetitive field.
Over-charging can only be temporary in a free market, but can last for many years when it is government protected. Good example in the US is airlines which were increasingly more regulated (restricted entry) for decades, until deregulation began in 1978 allowing prices to fall for consumers as the market became more free.
Mike Blain So all those mergers and aquisitions must be my imagination right? The less companies competing means less competition. And you haven't addressed cartels. And airlines are still regulated like everything else. Still believe what you like, a lot of laws protect consumers in my country.
julesdlush
Obviously mergers happen, but they don't effect real competition. If, in the end, there is only a single supplier of some specific product, they still have real competition, against any similar products, or against new startups. Cartels are no different in principle than mergers, but are less stable because members can defect (as OPEC members often do by boosting production volume)
The US airline deregulation in 1978 was obviously not safety regs (which are still in place). It was the government (CAB) preventing new routes, and preventing discounted tickets. Yes, airlines were actually getting fined for offering "secret" discounts. How is that protecting the consumer? They were even prevented from offering perks, like better meals. *The government were protecting the existing airlines from having to compete.* For consumers, a price fixing arrangement with government like that is more scary that any arrangement between businesses, because business cannot enforce price fixing like govmt can.
I'm glad you feel consumers are protected in your country. But in the US and Europe, the main law they use is antitrust, which usually works against consumer interest, to protect the weaker less efficient competitors.
Dear American Friedman fans,
I've got a question: Friedman said that the railway industry was doing so bad in the USA because of the ICC. Since the ICC was largely abolished in the 1980s and dissolved in 1996, how is the situation today? Has it improved? If not, why? thanks :)
+GodfatherCorleone77 Didn't he say the opposite? He said the railway industry only became a monopoly because if the ICC - the point being that monopolies are more likely to be created because of government intervention; and without said intervention, they "fall into pieces". So Friedman was basically correct.
Alan Greenspan loved Milton Friedman and was a minarchist at heart...and look how that ended up, with a global financial crisis. The problem with Friedman's ideas are that, for all the irony of his criticism of socialism, they are too utopian. Monopolies and exploitation in capitalist markets are inevitable, because you make more profit if you merge, exploit and reduce your competition by merging with it, leaving the consumer with less choice.
This is where libertarianism just breaks down into a million pieces. Monopolies are just a natural part of capitalism regardless of the size of the market, national or otherwise. Companies will just combine to form one large mega company that will eventually make free markets impossible. This has already happened in this country (USA) with steel, oil, and railroads, telecommunications, tv, radio, and retail sales.. Now we're seeing it with banks and there ultimate governmental deregulation. Some have been previously broken up, but most just form back together when they have successfully bribed the government into allowing the mergers. Pretty soon there will be no choice at all and the government will be forced to either break the monopoly (not likely anymore, too much corruption) or enforce them (more likely, that's where the money is). Luckily, for now at least the people have the internet. How long will that stay open and free though??? Also foreign competition may have an agenda that does not align with a country's cultural values. Which is another topic.
What precicely will this "one large mega company" produce? Why can't I produce it better? Why can't I produce something that makes the other company irrelevant? What is stopping you from entering a market and innovating? What are the barriers to trade?
In the true sense of the word monopolies can't exist. Every big company can be taken dn by a small company. Ex Kmart was once tiny took sears marketshare. Walmart was once small took kmarts. Amazon was once small. Now the biggest biz in the world. If monopolies existed in the true sense of the word you would go to Walmart and buy toothpaste and they would force you to pay 100.00. Bigger companies drive dn prices.
There's always the story of the big company coming in and taking biz from the small corner store. The small corner store is run out of business bcos of lower prices. Who's buying products from the bigger store? Everyone. Or else the big store wouldn't have any biz. Everyone is saving money at the expense of the small guys loss. It's self interest. The small store is against greater skill.
Well, you can survive as a small corner store. Mind you that the main advantage of the corner store is accessibility and convenience. You are coming tired from work, you dont wanna lose time entering a big hypermarket, then in line to pay up. A small corner store is more time efficient and when your store has the basics at a low price, you turn profit by the quantity of sales.
+Stephen Dearden
"Monopolies are just a natural part of capitalism regardless of the size of the market, national or otherwise."
This is a gigantic fucking axiom you've set up that you then didn't back up at all. Did it ever occur to you that you need to explain *why* this is true and how you reasoned it out? Not only to us but yourself as well. Folks this is one of those famous "blank outs" that Ayn Rand describes.
You have comfortably sidetracked the questions I asked like sustainability. Anyway, the fact is that there has never been in history free markets of the kind you recommend, and that's because of a reason. "The better the outcomes"---we're expected to take what free marketeers say on face value? And yes, of course, free markets do not exist---it is the government's decisions that exist. Concept of "Free market" is a tool used to implement socialism for the rich and capitalism for the poor.
Though I typically agree with him, it's naive of Friedman to not see the lack of nationalism in his answer, and the consequences of playing by those rules... especially when other nations play a much dirtier game, giving their like kind competitors a leg up to the detriment of Americans.
It's absolutely true. Please read my comment.
First off, the type of security offered under a regime where your rights can be violated at any time without due process is not what I would call security, it's tyranny. Second, innovation is not simply about the accumulation of wealth. Rather, its the idea that I determine my own self worth based on what I am willing to contribute to society, without interference from government.
@asleeperj big companies buy smaller companies, or lead them to bankrupcy, becoming the only option for the consumer. Also, competitive companies can also set equal prices to their products and create an oligopoly.
Milton believed that the Federal Reserve should be a mechanism in which money creation would be tied to production. His primary error was in not recognizing the potential and likelihood for "arbitrary" money creation. Later in life, he agreed that the FED was clearly a net evil and needed to be abolished. Milton lived in the realm of reason, unafraid to have his ideas confronted. As a result, he pursued truth rather than hold to a viewpoint that flew in the face of compelling evidence.
@ecalebw Friedman simply advocated economic liberty. He did not seek a total divorce of man from any social contracts. He just wanted to divorce government.
In a free society, people are free to establish any foundations they wish and make any social contract they wish. The only problem is, they really think the project is worthy enough to voluntary contribute to it rather than use the force of government. Your problem is not with Friedman, it is with concept of individual liberty itself.
It is precisely the rules and regulations that allow parties to pursue their own interest efficiently. They have security, fairness, legal tender, access to labor, etc.
But history shows (in the two cases Std Oil & Alcoa) that they DID keep prices low.
Industry is not as simple as you think, even when there is high-barrier-to-entry. Alcoa brought down market price to only a few percent of the price 50yrs prior. Suddenly it was in competition with other cheap materials in 1940s like steel, bakelite, porcelain. They were not just competing against a potential Alcoa clone startup. Secondly, they also had the risk of imported aluminum if they raised prices.
The difference between existence of "free markets" and freedom is that freedom is a meaningful concept for an individual, but free market is courtesy a government. And this really negates the existence of "free markets".
What you describe is a common fear, usually promoting antitrust laws. In the real world, it does not happen. Big companies working within the competitive market place usually keep prices low enough to not allow competitors to enter. Its in the business interests, and the consumer's.
Examples are Standard Oil in the 1800s, ALCOA in the 1930s. Because those companies were so efficient, they won high market share using low consumer prices (and ironically were punished for it using antitrust)
I don't think Friedman was thinking about the large, multi-national monopolies that can exist today. We've tried his 'free trade' and we watched our jobs and standard of living leave the country.
Conservatives up to Herbert Hoover believed in tariffs and using them to protect the American standard of living. We did quite well when we operated like that. The only reason for the Great Depression was the aftermath of WWI (International turmoil that we participated in) and mismanagement of our money supply.
Actually, he said, the '29 stock crash resulted in a recession that became a depression because the federal reserve actively cut the money supply by 1/3, not entirely related to the short term fed funds rate. He position was GIVEN that the central bank existed, then it became necessary to act - which is why he was against the fed towards the end of his life, he thought it was unfixable.
If the kid's suggestion was implemented, profit signals in the price system would have limited power. There are very bright people who make enormous profits off detecting a societal demand and serving that demand. If you put a cap on the level of profit he can make, you slow down the speed at which production of a good or service whose price has fluctuated, the profit signal, will adjust with respect to that fluctuation. This dampens growth overall. Not only this crucial fact, but there is
(3) Not only is that good for consumers, but the absence of competitive markets frees capital for other goods and services. This results in less bloat in the economy and more variation in specialization, leading to more product monopolies, leading to a higher standard of living.
That is a very good question: people prefer comfortable lies to the hard truth. And politicians are very good at telling comfortable lies. In the words of Thomas Sowell, “When you want to help people, you tell them the truth. When you want to help yourself, you tell them what they want to hear.”
Ok. Someone who's thinking. You are correct in understanding that free trade does require individual freedom possible only by rights protection. That is the role of government and should be the only role. Economic regulations should not be on its job description.
Interestingly, Milton's son David Friedman has an excellent case for privatizing even Law itself using competing rights protecting agencies.
Friedman explained it quite frankly, "the public at large gets what they want," and while they support limited government and competitive markets in general, they oppose it in PARTICULAR.
It is actually very hard to hold a monopoly. The bigger you get, the less flexible you become. Even though you may have a huge pool of wealth and technology at your disposal, it is very hard to adapt as there are so many management levels you have to go through to get permission to do anything. The best example is A&P groceries. It had a huge monopoly on groceries, but in a matter of a decade, they were destroyed by smaller stores that were flexible.
@lachylolHamish You can't keep buying out competitors unless people value your product enough to enable you to do so. Also, you seem to ignore the fact that many products can be substituted for one another (there are many types of food, etc) and that other factors like technology can favour new companies as much as existing ones.
Agreed, separating economic and political power is key but that does not imply laissez faire/no regulations.Individual corporations do not naturally want to compete fairly. There are more gains to be had from rent seeking, exploitation, graft, etc than competing fairly, which is hard work. To keep corporations/economic power in check and in a lasting state of efficient competition requires smart regulation that evolves with the economy/society/technology.
Monopolies arise from the restrictions of free trade imposed onto its competition. Insightful.
I agree that affirmative action, equal pay and such laws are misguided and address symptoms not the root cause of declining social mobility in the U.S. Rather the focus should be on equal opportunity (education, health, infrastructure) to increase broad based productivity and mobility (i.e. poor getting rich and rich getting poor) and to not protect corporations and the rich from competition, ie, no monopolies/trusts, subsidies, trade protection, legal/regulatory/tax loopholes, etc.
A warm great man the Big Milton
That's what Friedman was talking about, most of them fail due to competition. The issue here with "doing something" is most likely government administrators will make matters worse - the history is there. NO ONE has been able to match that over 99% grade a competitive market brings. We actually have one now, because of the SEC.
To the contrary, even if coercion were not specifically excluded from the free market and subject to sanction, the incentives of the free market quickly punish those engaging in force or fraud (no one wishes to deal with them and they quickly find themselves unable to participate). The system all but eliminates such things in very short order because such activities are unsustainable.
@NietzscheanMan I don't understand your point. The Patent office is a part of the Dept. of Commerce. The Patent laws are federal and patents are registered federally even if enforcement happens at the state level.
Conceding the fact that, imho he was wrong on monetary policy, I will forever respect his ability to bring a widely misunderstood topic clarity for the masses. He may not have been the most brilliant economist to have ever lived, but his ability to deliver that kind of deep understanding to the masses was unparalleled. He brought me into the game at least.
You example may work, if their is only one other alternative and it is 10 times more expensive. You also have to have a situation where the monopoly actually occurs. There are a lot of qualifications to make it applicable. You don't see huge companies denying business to people by jacking up prices however. Microsoft got huge by doing business with almost everyone, just like Wal-Mart. That also meant they needed their products to be affordable for most people.
The trouble with those sorts of monopolies is that they thrive off of no-one else understanding their business, or even the 'language' they speak.
Law the first is free trade, law the second is to make all companies accountable for any unclear communication to 'laypeople' in contracts, business, etc.
@bubba007ss Sorry, I should clarify one part of my last statement. Free trade over time in a perfect world will continuously cause the balance to shift between those who can figure out a way to deliver the product/service more economically or provide a better product/service for the same or lower price. The secret is in seeking to be the best, not the economic power.
@bluefootedpig True, but most people would agree that the subsidies given to corn are more of a problem in the US,
and I wish they were removed.
@mikerowphone [Continued] Monopoly products must still compete If the demand is elastic, people will substitute other goods if the prices are too high. Furthermore, there are limits to the inelastic demands. Imagine if oil was suddenly $1m per barrel not because of supply/demand but because they wanted to increase their windfalls. At that point, demand would have to drop off (until the resulting World War III was over and oil production resumed)
@wowzinger wow...thanks for the clarification.
You are right to not trust the regulation of the money supply. The verdict of history is clear, just some refuse to see it. I think the most compelling demolition of both the morality and efficacy of Keynesian theory is put forward in the classic novel, Atlas Shrugged. My guess is that you will also enjoy exploring the books of Tom Sowell. Basic Economics is a classic and the Quest for Cosmic Justice was particularly valuable in clarifying my inclinations about liberty and social planning.
Human beings are not suddenly made perfect by an economic system. "Criminal companies" are unbelievably rare. In fact, corporate scandals are so rare that when they happen (Enron, Wroldcom, etc.) they are newsworthy literally for YEARS while hundreds of thousands of companies in the US alone do their business every day without incident. Compare that to the scandal record of 535 members of Congress.
And retirement delays stem from a government caused recession.