Re: Fine!
Ok. Fine... Then please define what a 'market force' is - and what it is not. I have never claimed to be an economist.
"Market force" is the push towards equilibrium.
First, in classical econ, if you presume starting with a "free market" - many buyers, many sellers, and perfect knowledge, you get a supply/demand curve.
*sigh*. Just look at this with a fixed font:
|\\S /D
| \\ /
| x
| / \\
|/ \\
----------
^Cost > Units
X is the equilibrium point - where the most buyers and sellers agree.
As we all know, that's not realistic. Some items, for instance, aren't elastic - if you've got to have a drug to stay alive, and its made by one company, then that throws the above out of whack.
If you were in a "free market" - then anybody could produce that drug, and soon the cost would be slightly above what it takes them to make it (back to equilibrium). (pardon me for not trying to do a more complex graph showing an out of eq condition).
The market always drives towards equilibrium. Yeah, that's slightly religious, but you can see it with just about anything. How many people who just got laid off ran out an bought luxury cars? Around here, at least, the car dealers are offering much better deals than they had been, because they're selling *lots less* new/slightly used cars.
Things like imperfect information are corrected, over time. (as more people come to find out the information, buy less), etc. etc.
Now, a monopoly is a market imbalance. Because of the monopoly, the S curve moves up, as they *can* charge more, the Demand stays about the same. (I need a whiteboard). But basically you're now charging more than the market bears. Which means, profit.
Which means, somebody else is gonna say "We're not just doing this for money... we're doing it for a SHITLOAD of money!" and jump in.
Thus for a monopoly to succeed (to digress slightly), there can't be easy subsitution (elasticity), and there can't be perfect knowledge.
So you *can* show monopoly on these sorts of charts. But - if they charge too much, eventually SOMEBODY will find a way to open that up, and make their own money. Which is why you have trademarks and patents and "government enforced" monopolies...
But back to the "simple" market. You and I make widgets. Interchangeable for all intents and purposes. We charge 5 clams apiece, and sell 4 goombahs a day of them (each, total of eight). If you raise your price to 7 clams - and I don't raise mine - what happens? I'll sell 8 goombahs. Assuming I don't have 8 of them, I'll sell the 6 I do have, and you'll sell 1. The last will drop off, because the seller will say "that's too much" (the demand drops to 7 at your price.). Can you afford to do that?
Depends on a lot, on your costs, on my costs. Maybe I'll raise my price to 6 clams, maybe I can increase my production then, and sell all 7 goombahs of 'em, and you don't sell any. Oops. you're in trouble. So you'll have to drop your price to 6... and then you'll sell 3 goombahs.
*That's* market force.
Say for instance, you can't charge less than that. You've got to charge that much to cover your expenses. Either you'll sell less - or I'll raise my price and make more money, selling less (because you'll again get 1/2 the sales). If I'm making too much, then we'll get a 3rd seller in soon, and he'll sell for 5 clams again, and be happy with those results, and we'll all have to drop prices.
Its the competition between buyers (and sellers) that drives the equibrium. And as you know, there isn't perfect knowledge. But as things are cheaper, you'll sell more. More expensive, less. That's market force.
So you get the "realities" in. Especially in constrained areas. Say, for instance (Hi, Ben), New York City housing. Now, there's a problem with the "simple" model here - that its not easy to ramp up more housing. So the demand goes up, and the supply goes down. So the prices go higher and higher. So, since its so expensive, and democracy is great, the government steps in and puts a ceiling on what you can charge.
So your apartment is "worth" 500 clams, now. But the government says you can't charge but 250. So you're "losing" 250 clams. Is this market force? No. Its an external influence on the market. Supply and demand aren't coming to an equilibrium. (Otherwise, it would be worthwhile for more apartments to be built/buildings converted/renovated, etc, until it wasn't profitable). With the ceiling in place, there's a limit to what you can charge/profit, so its not worthwhile for other people to enter the market. (And the actual laws, as I undertand them, are pretty byzantine).
Back again to the monopoly. Since you can't subsitute, since you have to buy from the monopoly, the monopoly gets to charge what it wants, and artificially change the S/D curve. Now - notice that for the most part, the *sales* will *decrease* under a monopoly. wait, you can't notice. Argh. I need a whiteboard.
[link|http://www.westvalley.edu/wvc/ss/econ/micro.html|Graphs]
In that graph, with Microsoft, rather than selling X at $70, they sell Y at $190 (and theoretically make a lot more).
Drat. can't find better graphs on a quick search.
Anyways.
So antitrust (remember Antitrust, its a song about antitrust) doesn't show up here anywhere. I see what you're getting at now, but its still not a market force. What antitrust attempts to do is be another external influence, that ALLOWS the market force (price versus demand) to take over.
Take Standard Oil (please). Antitrust didn't *lower* prices, it created seperate companies - so that THEY would compete (and in theory, lower the price to the equilibrium). So its wasn't a market force, itself, but (in theory) would allow market forces to re-control that market.
This makes it an external influence, but not a market force, no matter whether it was because of the market, or Nancy Reagan's astrologer. (Which notice, would be just as valid a reason as a monopoly getting people to call their congresscritter....)
That seems to be a matter of (religious?) faith to me... Can you PROVE this? Mathematically, that is.
It is, to a degree. And there's a lot of economist blood spilled over that point. I take the viewpoint that eventually, it *will* be made irrelevant, based on past history. Had AT&T kept their stranglehold on telephones, instead of satellites attacking cable, they'd have gone after the more lucrative phone market, (for a possible example).
IBM's monopoly on mainframes was hampered by the ready supply of "minicomputers" by Digital and others.
So its my belief that in the long term, the market *will* correct for a monopoly, but that's not a reason not to have antitrust.
Addison
