trc@houti.UUCP (06/06/83)
Response to David Sher on monopolies: If the entry costs are too high, relative to the profits, to encourage market entry, why is the monopolist in that business? And how would he afford to enter it? If you mean that the costs are simply too high for the small businessman to enter, though the profits are very good once the costs are overcome, it is likely that the monopolist will soon have competition from other large concerns with the necessary cash, or from a consortium of businesses, each taking on part of the burden in return for a share of the profits. Actually, there is one valid way to get a true monopoly without any use of force or government protection (as in patents). This is the trade secret - where a company has developed a secret process that gives it a tremendous advantage over its competitors, allowing it to CUT costs while making good profits. So long as it maintains lower prices than its potential competitors could provide (or substantially higher quality for the same price) it will be able to hold a monopoly in that area. For really new products, other businesses can compete by doing research, and developing their own similar product. While this may sound inefficient - reinventing the wheel - it is the source of new products. The important thing to remember is that competition is NOT a goal. To the businessman, it is the (ethical) means to a good end, namely of making products and selling them to willing customers. To the customer, competition is beneficial, but again, what counts is that desired products are made available by ethical means. (Before someone mentions it, "cut-throat" and "dog-eat-dog" competition are labels that are usually used by those that cannot, or do not want to compete in a free market. For an interesting examination of some of the motivations for such an attitude, read "Atlas Shrugged", by Ayn Rand.) Tom Craver houti!trc