Why are monopolies bad? In a standard intro-econ textbook, the problem of monopolies is that because of the lack of competition, they can reduce output from what it would otherwise be, jack up prices, and thus earn higher profits. Some books also mention that monopolies may have less incentive for quality or innovation--again, because of a lack of competition. James A. Schmitz, Jr. at the Federal Reserve Bank of Minneapolis refers to this standard intro-econ model as a "toothless" monopoly, because in that model, all the monopoly firm can do is raise prices. He argues that it doesn't capture what bothers most people about monopoly. There's also also a concern that monopolies take actions to take action to sabotage and even destroy their rivals--especially the rivals who might have
Timothy Taylor considers the following as important:
This could be interesting, too:
Miles Kimball writes James Nestor on How Bad Mouth Breathing Is
Bradford DeLong writes Edmund S. Morgan: Slavery & Freedom—For the Weekend
Bradford DeLong writes Morgan: American Slavery, American Freedom—Noted
Bradford DeLong writes The Obelisk of Wokeness & the Dome of Cancellation
James A. Schmitz, Jr. at the Federal Reserve Bank of Minneapolis refers to this standard intro-econ model as a "toothless" monopoly, because in that model, all the monopoly firm can do is raise prices. He argues that it doesn't capture what bothers most people about monopoly. There's also also a concern that monopolies take actions to take action to sabotage and even destroy their rivals--especially the rivals who might have provide low-cost competition. Moreover, monopolies may form concentrations of power with other monopolies or with with political allies to accomplish this goal, and in this way corrupt institutions of law and politics as well.
When Arnold left the DOJ, he did not stop challenging monopolies in traditional construction. He did not stop trying to protect producers of factory-built homes. In “Why We Have a Housing Mess,” Arnold (1947) began with a picture of a homeless Pacific War veteran, with his wife and five children, sitting on the street with their belongings (see Figure 2). The caption said: “This Pacific War veteran and his family are homeless because we have let rackets, chiseling and labor feather-bedding block the production of low-cost houses.” Arnold began his text this way: “Why can’t we have houses like Fords [i.e., automobiles]? For a long time, we have been hearing about mass production of marvelously efficient postwar dream houses, all manufactured in one place and distributed like Fords. Yet nothing is happening. The low-cost mass production house has bogged down. Why? The answer is this: When Henry Ford went into the automobile business, he had only one organization to fight [an organization with a patent].But when a Henry Ford of housing tries to get into the market with a dream house for the future, he doesn’t find just one organization blocking him. Lined up against him are a staggering series of restraints and private protective tariffs."
Many housing industry observers noted that stick-builders were facing such threats from
factory-built home producers in the 1960s. Though they did not have direct measures of
productivity, they compared the costs and prices of new, site-built homes to the costs and
prices of other consumer durables. Alexander Pike (1967), an architect, compared the prices of new homes and the prices of new cars from the 1920s. Though he did not have productivity statistics, his point was clear: the productivity of construction badly lagged that of the car industry. At roughly the same time, the research department of Morgan Guaranty Trust Company (1969) wrote about this productivity divergence when discussing the potential for industrialized housing ... in “Factory-Built Houses: Solution for the Shelter Shortage?” They noted the serious problems facing the stick built industry as its productivity lagged. They showed that, over the period 1948-68, the prices of consumer durables rose roughly 22 percent, while residential construction costs rose roughly 100 percent.
While the sabotage of factory housing has been going on for 100 years, there was a dramatic surge in the ferocity of this sabotage in the middle 1970s. During this period, laws were passed, and regulations implemented, that sent the factory-built housing industry into a tailspin. These regulations, and additional harmful ones introduced since the 1970s, remain on the books and mean the industry is a shell of its former self. When this new sabotage was unleashed in the middle 1970s, the producers of factory homes were well aware of it, of course. They fought the HUD and NAHB monopolies to reverse the sabotage but lost the fight. Today the members of the factory-built housing industry are unaware of this history.As Schmitz documents, the pushback came in many forms, including regulations and subsidies. As one example: Who knows how high the factory share would have risen if new sabotage of factory production would not have commenced in 1968. At that time, a national subsidy program was started
for households buying stick-built homes (see below). Under these programs, households purchased 430,000 stick-built homes (per year) in the early 1970s." There have been court battles, and the "is it a trailer, is it a house" battle has been refought many times. For example, there is often a rule that a manufactured home must be built on a permanent and unremovable chassis--like a trailer--even though that's not what many customers would want.
- "Limits for Corporate Bigness on Acquisitions, Patents, and Politics" (August 13, 2019)
- "Antitrust in the Digital Economy" (July 19, 2019)
- "Three Questions for the Antitrust Moment" (July 9,. 2018)
- "Network Effects, Big Data, and Antitrust Issues for Big Tech" (February 13, 2018)