Monopoly Money

First, let me acknowledge Chuck ' s comment on the previous Economics 101 post. I ' m going to get to public goods, it ' s extremely important, but I figured I ' d push it down the list because it ' s easier to deal with the rest of the assumptions first. (To put it formally, the ones having to do with public goods are that all good are non-exclusive and non-rivalrous, and also that there are no positive externalities. I will explain anon.)Today, I ' m going to deal with the Many sellers, Many buyers assumption. It ' s obviously impossible even for Milton Friedman to bamboozle people into thinking that this is somehow a natural property of any economy. Most of the people who think that Adam Smith ' s The Wealth of Nations is their Bible haven ' t actually read it, just as is the case with the actual Bible. Smith was well aware that capitalists will enter into what he called a " conspiracy against the public " at every opportunity -- that is, join forces to fix prices. Since he published in 1776, another strong tendency has been for corporations to buy up their rivals or drive them out of business, until one or two huge corporations can set their own prices. This happened with the railroad and petroleum industries in the late 19th Century, which eventually led to the antitrust act and Teddy Roosevelt famously breaking up monopolies.In other words, the only way to make the world resemble the Free Market ™ even approximately is for there to be government regulations and laws t...
Source: Stayin' Alive - Category: American Health Source Type: blogs