Quotations of the day from Alan Greenspan
AEIdeas
1. “Capitalism is based on self-interest and self-esteem; it holds integrity and trustworthiness as cardinal virtues and makes them pay off in the marketplace, thus demanding that men survive by means of virtue, not vices. It is this superlatively moral system that the welfare statists propose to improve upon by means of preventative law, snooping bureaucrats, and the chronic goad of fear.”
“The Assault on Integrity“, 1963 (HT: Dennis Gartman in today’s The Gartman Letter)
2. “The world of antitrust is reminiscent of Alice’s Wonderland: everything seemingly is, yet apparently isn’t, simultaneously. It is a world in which competition is lauded as the basic axiom and guiding principle, yet “too much” competition is condemned as “cutthroat.” It is a world in which actions designed to limit competition are branded as criminal when taken by businessmen, yet praised as “enlightened” when initiated by the government. It is a world in which the law is so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge’s verdict—after the fact.”
“Antitrust,” essay at the National Association of Business Economists (September 25, 1961); published in Capitalism: The Unknown Ideal.
I have to disagree with Mr. Greenspan and many, many others on monopolies being good in general and Antitrust is bad.
Does anybody remember that AT&T wanted to buy T-Mobile a couple of years ago? There were concerns about consumers being harmed because of reduced competition.
So, T-Mobile was not bought out by AT&T and the result for consumers: T-Mobile soon presented the Simple Choice Plan which has shaken the cell industry — by eliminating long term contracts and offering other goodies.
Does anyone think that AT&T would have come up with a cell plan that eliminated long term contracts right after acquiring T-Mobile?
I did not agree with the feds going after Microsoft for monopoly, because there were other operating systems cheaply and even freely available(Linux).
IMO the barriers to entry have to be very formidable for the feds to get involved in possible Antitrust actions.
I don’t think you’l find many liberty minded folks saying that monopolies are good. Greenspan certainly isn’t saying as much in this quote.
About monopolies
-Most of them don’t last very long in the absence of government support
-Most of them are either created explicitly by government (think cable companies)
–or propped up by them. (think the regulatory system surrounding wireless companies)
-Given a choice between monopolies and anti-trust, anti-trust will distort the market more.
Monopolies aren’t good, but they’re self-defeating in the absence of government intervention. May take a few years though.
Cit
As Joshua pointed out, I don’t think anyone is rooting for monopolies, and as he also said, in essence, a natural monopoly can’t exist in a free market. The one exception I can think of being the De Beers diamond cartel.
Remember that the market for phone service is hardly a free market, and that AT&T was originally a government regulated monopoly on long distance service that was later broken up by that same government. The highly regulated world of communication services isn’t a very good example of a free market in action.
It seems that the concern over the AT&T / T-Mobile merger was that it would result in fewer players, which doesn’t necessarily lead to less competition.
“Does anyone think that AT&T would have come up with a cell plan that eliminated long term contracts right after acquiring T-Mobile?”
Probably not, but if the merger had put more pressure on Verizon, the current largest player, then Verizon might have done so. Hard to say.
“IMO the barriers to entry have to be very formidable for the feds to get involved in possible Antitrust actions.”
And in this case, the barriers to entry are created by the government itself.
If we follow the advice of Bastiat, and always take the view of the consumer, it’s harder to see monopolies anywhere, absent government interference.
Joshua and Ron, I think we can all agree that the feds can create conditions through regulation that incubate monopolies.
The feds should then at least make sure there is some semblance of competition, between highly regulated entities in certain industries by market forces.
Cit
“Joshua and Ron, I think we can all agree that the feds can create conditions through regulation that incubate monopolies.”
They can and they do. The question we should ask is whether they should. Why is a government monopoly good and a private monopoly bad?
“The feds should then at least make sure there is some semblance of competition, between highly regulated entities in certain industries by market forces.”
Better yet, perhaps the feds should stay out of the market altogether. Market forces are distorted or defeated by regulation. In a highly regulated field like telcom, there is no advantage to a larger number of companies. Competition and entry by new companies basically isn’t allowed.
I have to disagree with Mr. Greenspan and many, many others on monopolies being good in general and Antitrust is bad.
This is a nice display of dishonesty. There is simply no honest way to turn “It is a world in which actions designed to limit competition are branded as criminal when taken by businessmen, yet praised as “enlightened” when initiated by the government.” into your above statement.
And your example of AT&T and T-Mobile merger is one of the most laughable with which you could have come up. Telecomms are the one of the most heavily regulated and government controlled industries in the country. The very limitations on telecomms competition is directly due to the government action you oddly want to praise. The barriers to entry to the telecomms market is the government.
The feds should then at least make sure there is some semblance of competition
Why?
Also, the language you use is exactly the language monopolists use in order to convince the public to support the government actions those monopolists want that will strengthen their monopoly. It’s not surprising that entrenched economic players are the most vocal advocates of government regulation: they are the ones to which government bureaucrats turn to write such regulation.
Tell me, why are you praising actions that limit competition when it’s performed by the government, but would somehow be criminal if done by businessmen.
It’s like you’ve never heard of public choice theory.
“This is a nice display of dishonesty.”
That’s quite a display of a churlish non-starter.
Of course these quotes are from the old Greenspan, before he went to the dark side.
Three prisoners in a U.S. jail.
One: I charged higher prices than my competitors. I’m in for exploiting consumers, profiteering, and monopoly.
Two: I charged lower prices. I’m in for predatory pricing and cutthroat competition.
Three: I charged the same prices. I’m in for collusion, price fixing, and cartelization.