From: Jim Choate <ravage@ssz.com>
Date: Mon, 12 Jan 1998 07:47:45 +0800
To: cypherpunks@ssz.com (Cypherpunks Distributed Remailer)
Subject: Re: A further thought on free markets & anarchy... (fwd)
Message-ID: <199801120013.SAA19485@einstein.ssz.com>
MIME-Version: 1.0
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Forwarded message:

> Date: Sun, 11 Jan 1998 11:40:33 -0800
> From: Bill Stewart <bill.stewart@pobox.com>
> Subject: Re: A further thought on free markets & anarchy...

> If you begin by assuming that a free market will automagically acquire
> someone with monopoly control who can prevent all competitors from acting,
> you've got a rather different view of free markets than I do,

First, it isn't magic. It is the realization that any market is limited by
several factors (eg number of customers, limited raw resources, startup
costs) and that even a small superiority in one businesses ability to
produce their service or product over time will provide them with an
increased share of those limited resources and the share in profits that
acrue as a result. As their share, and hence their control over, those
resources increases the competitors are faced with the prospect of having
to go to the competitor to get what they need in order to compete.

It is *not* a part of any free market theory that I am aware of that
pre-supposes that a given business entity will, for whatever reason, of its
own free will guarantee the continued existance of competition. If anything
the long term goal of any business is to reduce competition.

If we accept the commen view of free markets and the one you seem to be
saying is the reality, we shouldn't worry about Microsoft. One morning
they'll all wake and realize that if they don't keep HP, Sun, IBM, Apple
in business they won't have competition. As a consequence of that
realization they will in fact provide contracts or other forms of
renumeration to their competitors to keep them in business and hence able to
take potential sales away from Microsoft.

What I am saying is given the environment and goals of operating a
for-profit firm the supposition that a free market will somehow prevent
monopolization is incorrect. I am saying that a free market economy when
operating without outside 3rd party guidance or some form of economic bill
of rights will by its very nature monopolize and reduce competition due to
nothing more than minute superiorities of individual business models and
the efficiency those businesses acrue over time as a result.

> and you're basically assuming that anarchy is unmaintainable in economies,
> from which the obvious conclusion is "so don't even try."

But the free market model as currently understood is an anarchy, at least at
the beginning. The reason that it falls into this category is that there is
no governing body or bill of rights. Each business is left to its own ends
and the consequences thereof. There are no externaly enforced limitations on
business practices in this model. Further, regulation of unfair (whatever
that means in a free market - personaly I thinks its a spin doctorism
equivalent to saying you can have an anarchy without inherent use of
violence) practices is completely abandoned other than the assumption that
eventualy competitors and consumers will learn of those practicies and quite
dealing with that business. The problem with that assumption is that by the
time such practices become known there may be no competitors and the consumers
only option might be to simply have to do without the item completely. In
the case of a life sustaining resource this is no option at all.

> There are people who believe the same about political anarchy.

The point I am making is that the arguments that support political models of
social activity are not mappable to the economic ones in a simple one-to-one
method as the free market model (and many others) assume in a axiomatic
manner. That in fact, because of the inherent limitations of a market which
is not one-to-one mappable to the range of human expression (the field of
social systems) which has no inherent limitations in resources or means
such comparisons are flawed by this axiomatic assumption.

> However, I don't see you presenting any reasoning for the belief
> that a free market will become non-free and acquire a head.

The history of economics is filled with examples of markets without
regulation becoming monopolized. There was the example yesterday or the day
before regarding some rail baron and how they cornered the oil market
because they realized the efficiency advantage of using rail based oil
carriers. Look at Microsoft, the airlines prior to federal regulation.
The the long-haul trucking industry, the teamsters, etc., etc.

> Rather the opposite appears to have been the case in most environments
> where the economic actors don't have political actors supporting
> their bids for monopoly.

Microsoft certainly didn't have political supperiorty? And how can you in
good faith sneak in this concept of 'political superiority' into a discussion
of free markets which a priori and in an axiomatic manner require that such
regulation and their inherent regulatory bodies do *not* exist and most
certainly do not inhibit or otherwise limit the options available to a
commerical enterprise in that market. Smacks of changing the rules in the
middle of the game.



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