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Sunday Morning Ponderance: Monopoly Edition
December 16, 2012 Economics Problems

I am sure you folks are familiar with the claim that “markets are prone to monopolies.” Let’s just take that as given and accept the conclusion that this requires considerable government interference in the course of voluntary transactions. The data are not very clear that this is, indeed, what happens. Take a look at the persistence of firms in the US, or how long lived the current largest firms really are to get a sense for the monopoly-proneness of the US economy.

But consider this. In every single case where markets have been permitted to be truly voluntary, we have seen unions emerge. And what are unions but labor market monopolists – these are sellers of labor services that ultimately impose higher prices on the buyers of their product and take actions to make it hard for buyers to find substitutes. And indeed, not only does it appear that labor unions emerge always and everywhere we have unfettered capitalism, the largest labor unions tend to persist. Compare the top 20 labor unions today with lists of the top 20 labor unions in 1960 and see how that turnover compares to the concentration of firms on the employer side.

Now this is not an argument against unions or even an indictment of them. In fact, I support the idea of workers voluntarily associating (if that is actually what they do is another question entirely), Rather it is merely intended to have you think about the common arguments levied against firms and ask why they are not applied generally. I just think “firms are them” and “workers are us” and “we just don’t like them” is all this really amounts to. Dress it up in economics if you want, but it is nothing more than homeopathic economics to me.

"2" Comments
  1. “Homeopathic economics” — what a useful phrase! It’s one I can use in countless conversations. Thanks for that WC. This will come in handy. There is an economic think-tank where, believie it or not, the phrases “buying local” and “sustainability” are in vogue among the staff.

    It ranks right up there with your suggestion to use of the more accurate phrase “government schools” instead of “public schools”.

  2. i suspect its less of a subjective ‘us vs. themī¼’ and more of the mindset that nobody deserves to have extra. their assumption seems to be that suppliers/employers/businesses generally come out on top at the expense of workers, so labor market monopolists are more justified because they help the suppressed and oppressed stay strong. of course those people will have a difficult time telling you whats fair and whats not. and they do not seem to realize that blanket rules to stop all monopolies is likely to hurt employers other than monopolists

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