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Perhaps the most common anti-capitalist and anti-free-market canard is the unproved claim that we can never allow free markets to proceed without regulation and oversight. Why? If we allow free markets, the claim goes, in each and every industry giant firms will prevail in the competition for customers, leaving few or only one firm in each industry. Once these firms have achieved these favorable positions, they will raise prices, reduce quality and commit fraud on their customers at unconscionable rates.

Ignoring the fact that this has rarely, if ever, happened in American history, and ignoring the basic economics of competition which suggest that precisely the opposite results would prevail (even if firms acquired favorable positions), let us consider this monopoly argument in terms of a major sector of the economy — education.

Progressives and statists of all political stripes make many defenses of public education. I am not persuaded by any of them (a forthcoming article will outline all of this in a single place). But the case for public education is precisely a case being made that there should be a monopoly in this important industry. In fact, most people who support any government involvement in the economy make similar claims. But how can monopoly power be bad when it is achieved peacefully through market competition, but suddenly become good when it is held by the thugs with the guns?  Let’s ignore that little inconvenient idea and explore the question of monopoly and education a bit more deeply.

I have read many arguments in favor of public education, and a common theme in them is that we need public education to make sure students have a common experience. In other words, if we allow private education to flourish, there would be no guarantee that any student across America would learn much of the same thing (you would be assured they would learn how to read and write and do arithmetic, much like private producers manage to standardize important parts of their business to reduce costs and improve product compatibility). Progressives worry that civics may or may not be taught. Progressives worry that some children will get “too much” exposure to religion. Others worry that some will only do math and not have enough exposure to the creative arts. Others worry that some children will be better versed in history while others in literature. Others worry yet that some students would be in school settings for 60 hours per week while others might only have 5 hours of classroom time, but supplemented with more experiential learning and outside formal classroom education. Others worry that certain subjects will not be taught at the same time, for the same amount of time, every day for all students. And so forth.

In other words, one of the strongest arguments progressives make against private education and in favor of public education is that if you “allow” (as if we need to ask permission to educate our children in a way we see fit) private education then what you will see is a chaotic explosion of schools and educational methods and there would be no way to know what every American child would be learning. In short, private education would lead to precisely the opposite of monopoly. And is because this flourishing of diversity and difference that the government must step in, qua monopolist, and make sure we get a hold of this buckin’ Bronco.

So what is it folks? Does the free market lead to increased concentration, standardization and exploitation of consumers? Or does the free market lead to a flourishing of experimentation, satisfaction of myriad customer demands and an often chaotic (in appearance) industrial organization? You can’t believe both. If you believe the former, then how can you argue with anything near a straight face that the guys with guns and the teachers’ unions pulling their strings ought to monopolize the education sector?

Do you think the folks who were indoctrinated in the government monopoly school system recognize this inconsistency? If you say no, then what does this say about the quality of education people get in that system – that they would not be able to reason their way through to such ideas? If you say yes, have you not made my point for me?

2 Responses to “Economic Aphorisms – Monopoly Myths”

  1. Speedmaster says:

    Clear, coherent, logical … well-done!

  2. Harry says:

    Well, yeah, I say yes, and I’m glad to second your point.

    My Economics 101 professor spent so much time, maybe half the course, talking about monopoly (Samuelson was our text). Of course, oligopolistic pricing was discussed, to be fair, but it always was framed against the Platonic ideal of “perfect” competition, which existed only in the minds of Harold Ickes (Senior) wannabees, who would set prices to provide fair (low) returns to greedy capitalists.

    I remember asking a question: how come there is a gas war going on south of Hartford, with gas selling at 19 cents a gallon, when there is just a handful, maybe a dozen or so of big oil companies?

    I got an answer to that question, but I forget the answer, and was not educated enough to give a follow-up question, which may have been impertinent to the guy who controlled my grade. But the reason I remember the event is that the answer to this day never satisfied me.

    To the credit of the economics department, they did require you to buy a copy of Capitalism and Freedom, but we never got around to it in class. We did study other economic approaches, like the Gosplan of the Soviet Union, which was presented as a competing view to capitalism and freedom.

    Later in business that would be valuable. It would make me skeptical of the value of five-year plans done by boardroom strategic planners.

    But who am I to complain? We learned about supply and demand, and the Law of Diminishing Returns, and the Inevitable Tradeoff Between Inflation and Unemployment, not to mention the Keynsean Multiplier and Priming the Pump.

    The teachers who run our government-run schools have heard none of this, I bet, but they sure do know what monopoly means to them.

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