trc@houti.UUCP (06/02/83)
In response to Tim Sevener's note on the Great Depression and the free market: Tim claims that the 1929 depression was due to failure of the free market. In 1913, the Federal Reserve was established, to control banks. It determined how much credit would be made available. It followed a cheap money policy, keeping interest rates unnaturally low, and encouraging speculative investment. This led to over-extension by banks, eventually resulting in many bank failures. People began to panic, and sell their stocks - at first, to secure their gains, then to break even, and finally, to cut their losses. There was just too little real value in too many stocks. With such an awful result of government intervention, one might think that the lesson would be learned. Instead, the crash was blamed on capitalism. Normally, once the economic adjustment of the crash was over, the economy would have started a reasonable recovery. However, the government stepped in with a series of Acts, including abandonment of the gold standard. These steps, illustrating the ability and willingness of the government to arbitrarily manipulate the economy, resulted in a totally uncertain business environment. This prolonged the depression by reducing re-investment of capital, and paved the way for the vast expansion of federal power to its present level. A free market remains free even in the presence of a monopoly, so long as that monopoly remains in effect without use of force. So long as new competitors can attempt to enter the market and better the monopoly's prices in REAL competition (not the "hold the big guy back so the little guy has a chance" version), the monopoly would have to maintain prices at a reasonable level. Otherwise, it would often be embroiled in price wars, which would keep the prices about the same, averaged over time, but at a higher cost to them. THIS is the "natural play of .... forces" in a free market. Only when physical force, or the threat of force is able to be applied, as in government backed monopolies, do the evils ascribed to monopoly become possible. It is true that unscrupulous businessmen in a nation with a representative government can buy influence with legislators. But if those legislators had no power over the economy, no privileges or favors to grant, there would be no point in trying to bribe them. While a complete change-over to a republic would be the best step, a constitutional amendment forbiding any government intervention in the economy, and establishing a gold standard might be sufficient. Tom Craver houti!trc
sher@rochester.UUCP (06/06/83)
I have not taken econ for 4 years (and didn't do much then) but a memory has risen up within me of a situation wherein a monopoly can control a product market without use of force. This involves the fact that there are certain costs involved in entering a market. If the situation is such that the entrance fees to a market very high it will allow the monopoly to charge more than the market will bear and make a profit. Another point is that any government act has economic consequences. To illegalize that the government effect the economy is to practically illegalize goverment. Is that what you are proposing? I am sorry if this is a reiteration. The primitive news software here has its limits. -David Sher (ofttimes AI project)