Most people know that Americans benefit from high taxes, powerful unions, limited consumer choice, and strong government control. But most people lack the training to fully understand why we derive benefits from these policies, and why government control over public anything results in unsurpassable quality. To remedy your "knowledge deficit" you can ask us any question you choose, and it will be explained by the legendary Professor Paul Krugman in a language that you can understand. From the evils of profiteering, corporatism, and economic exploitation to the rewards of regulation, social justice, and community/stakeholder involvement, Professor Krugman will use his agile mind to clarify the otherwise intimidating field of economics.

Economics Primer 18: Antitrust

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Antitrust laws are designed to break the suffocating stranglehold that large corporate monopolies have over small but honest family-owned businesses. Most often, this takes the form of monopoly -- a situation where an entire market is controlled, dominated, and manipulated by a single firm. Theoretically and empirically, monopolies are inevitable because large firms merge and merge again until only a single firm is left.

The airline industry is a good example of one that is on the verge of being controlled by a monopoly. Do you remember Ozark Airlines? No you don't, because they merged with TWA. Do you remember TWA? No you don't because they merged with American. Similarly, other airlines of yesteryear, like Piedmont, Allegheny, Eastern, Western, Hughes Air West, National, New York Air, The Trump Shuttle, Pan Am, People Express, Frontier, Braniff, etc., etc. etc. have merged with and have been absorbed by other airlines.

Now, the industry has consolidated into a handful of mega-carriers: American, Delta, Northwest, United, USAir, and Continental (if we ignore Southwest, JetBlue, Spirit, AirTran, the many foreign airlines that the government correctly prohibits from providing domestic service) and several other US airlines, it is clear that the industry is dominated by a single supplier.

As a consequence, air fares are now at thier lowest ever. Does this make sense? Of course it does: Low prices are an indication of "predatory pricing", where a large firm will cruelly undercut their competition and mercilessly offer their services for less. Then, when all competition is destroyed, these firms suddenly gouge their customers, charging what they please from then on.

Can you think of examples of such behavior? I'm sure you can. Wal-Mart is an excellent example (other than in markets that have Target, Costco, Best Buy, Home Depot, Circuit City, Sears, Barnes and Noble, and Internet access). IBM is another good example of a monopoly; thirteen years of antitrust litigation against their business-machine monopoly proved that.

All of which brings us back to antitrust laws. Clearly, the best force that can counteract monopolies is a single strong government. Unlike greedy private companies, the government is democratic. That is, you either like the government, or you don't. This elegant dichotomy is "win-win" -- and therefore, the government will fine, punish, and break up firms that are about to become monopolies.

How does the government know which firms will otherwise become monopolies? By hiring economics experts; the strong analytic minds that knowingly predict all. It's the only thing that put the brakes on IBM from building every business machine in the world (to say nothing of slowing their future OS/2 powerhouse from utter domination).

Technically, antitrust laws are used against three economic hazards:

  1. High monopoly prices
  2. Low predatory prices
  3. Equal collusion prices

    Evidence of high, low, or equal prices is therefore sufficient cause for the government to mete out a punishment. And yet, even here, there are exceptions:

    1. The government itself must be exempt from anti-trust. This is because an effective government must not ever have any competition. And although some people (generally fascists) erroneously equate high taxes with high prices, the two have nothing in common. Remember: High taxes are a moral imperative, and high prices are corporate gouging. And besides, how could Congress get anything done if its members didn't collude to vote for necessary tariffs, quotas, research grants, etc. etc. etc. that benefit each other's districts?
    2. Not only must competition by discouraged among labor unions, it must be outlawed. If unions were allowed to compete, then how could a single union ever dominate an entire industry? And how else would they be able to collect dues from unwilling employees?
    In general, big is bad and small is good. Cooperation is bad and self-sufficiency is good. But that doesn't sound right, does it? Isn't capitalist competitiveness at the heart of deprivation? And isn't self-sufficiency a conservative idea? Therefore, we conclude that antitrust laws can also be used when there is evidence of either:

    1. Competition
    2. Cooperation

    In summary, a good government should outlaw high prices, low prices, equal prices, competition, and cooperation. This much should be obvious.

    I disagree!!!!!! We must allow monopolies to continue. If every evil corporation combines together to form one giant entity, the people will be clamoring for saviors. It will be time for a revolution lead by I , Che BaaBaabooie, and Generalisimo El Kabong!!!!

    We are currently in the Amazon hunting CIA operatives know only as "Moose and Squirrel". We believe these two are responisble for the political instability of Venezuela. It is by their hands alone that there is still corruption and poverty in that great nation. They causing chaos inspite the most noble of efforts of Hugo Chavez. We are accompanied by OJ because he has found new startling evidence that the operative known as "Squirrel" is the real killer!!!! If you have any information about the whereabouts of these Bourgeois fiends contact us!!!

    Che Baabaabooie