Re: Coercive Monopolies in Technical Markets (Intro)

From: Stephen D. Williams (
Date: Fri Apr 13 2001 - 12:05:42 PDT

Well written.

In a sense, GPL and the free/open software movement is an invention of
the market to combat this trend.

We'd obviously be better off with true commercial competition, but how
we get from here to there is a difficult political problem.

In a sense, some of the players who have been marginalized by the
overwhelming monopolies are merging their consumer interests and
producer potential while participating in a meritocratic cooperative.

This is true not just in OSs like Win32 vs. Linux, but also in databases
between the oligopoly of Oracle/Sybase/Db2/MSSQL and
MySQL/Postgres/Interbase/etc. IE/Mozilla, MSOffice/Star Office are both
clear examples of this end-run.

As much as I lament that the world would have been better off with more
MS competition over the last 17 years, commerical Unix Did used to cost
as much as $4000, even for Intel platforms. I guess it just took enough
time for Richard Stallman's (and a few early 'shareware' authors, along
with IETF and Unix related developers and recently Linus) memes to
sufficiently infect the technologically disenfranchised for us to come
out of the computing dark ages.

Free/Open software and related concepts seem to really philosophically
confuse a lot of people who seem to think that it's Marxest, etc. I see
it as compatible with capitalism with a few differences, but that's a
different conversation. One thing it's not is coercive.


Jeff Bone wrote:
> wrote:
> > Guess what? Unexpected philosophical conseuqences are what it's all about.
> > You'll never get away from the fact that balancing acts--between openness and
> > privacy, freedom and responsibility, and all the rest--are just that,
> > balancing acts. Equilibrium is always temporary. Hence the need for librium.
> > T
> Here's the summary: most critiques of antitrust by laissez-faire
> advocates proceed from the premise that the market itself ---
> specifically the capital market --- works to self-regulate and
> prevent the possibility of naturally occurring coercive monopolies.
> The argument tends to be that, whenever in history we have *had*
> coercive monopolies, they are the result of other kinds of gov't
> interference --- franchises, subsidies, etc. (Cases: railroads,
> phone and other public utilities, various kinds of mining monopolies,
> etc.) The theory is that these subsidies &c in fact *create*
> coercive monopolies, and that antitrust is a bandage on a
> self-inflicted wound. The free-marketers argue that without this
> gov't protected freedom from competition, capital markets would
> invest in competitive interests any time a dominant player's prices
> made it effective to do
> so.
> I buy that argument --- mostly --- for tangible, production-oriented
> markets. It works well when your economics speak about buying
> plants, hiring workers, procuring raw material, producing goods, and
> distributing product. The problem is that this clearly does not work
> in the presence of several other variables which are particularly
> important to technical markets: integration costs, switching costs,
> network effects, lock-in, interrelatedless of various products,
> distribution chain integration, interoperability, etc. In technical
> markets, these things quickly add up to huge barriers-to-entry; this
> inhibits the availability of capital for competitive interests...
> and the cycle continues, with the net result that coercive monopolies
> are naturally possible in technical markets. I leave open the
> question of whether such monopolies are naturally self-limiting;
> whether the "Microsoft situation" will eventually fix itself is
> debatable, the more interesting question being whether our existing
> laws encourage development of such monopolies, and how to avoid them
> in the future.
> It's worth going back to the initial premise of the laissez-faire
> thinkers: coercive monopolies result from gov't interference in the
> normal progress of economics. In most cases of technical monopolies,
> it's not immediately obvious what the particular gov't interference
> that enabled the monopoly might be. Or is it?
> It's become my belief that various forms of gov't franchise, combined
> with particular weaknesses in our law and its underlying philosophy,
> act to enable coercive monopolies in technical markets.
> Particularly, our intellectual property laws (patents, copyright,
> etc.) act as a form of gov't franchise to accelerate and solidify the
> naturally-occurring lock-in you get in technical markets.
> Particularly pernicious: government-mandated standardization on
> certain technologies, when those things are proprietary and protected
> by gov't IP franchise.
> In the coal business, all you need to compete with BigCoalCo is a new
> source of coal; in the soap business, all you need to compete with
> BigSoapCo is a new soap formula; but in the operating systems
> business, for instance, to compete in the enterprise desktop market
> today you have to have --- Windows. (Note that Linux, despite its
> market capture success, cannot truly be viewed as a competitor as it
> is not competing with Windows on an economic basis: it's free.)
> Imagine if our gov't were to grant exclusive license to BigCoalCo for
> all coal production; clearly, that's a bad idea! Yet our current IP
> laws have just that effect. Something is rotten in Denmark.
> It is clear that Microsoft's monopoly is fundamentally different from
> the previous monopolies that (perhaps wrongly) led to the Interstate
> Commerce Act and the Sherman Antitrust Act. The surprising
> consequence of asking how Microsoft (and similar technical
> monopolists) achieved its monopoly is the discovery of (yet another)
> smoking gun, more evidence of the weaknesses inherent in applying our
> existing notion of property rights and laws to intangible assets.
> So here's the start of the argument: in order to avoid coercive
> monopolies in technical markets, we must seriously rethink the "why"
> and "how" of property laws for intangible assets. That pains me
> greatly as an advocate of strong property rights. In order to
> understand why we must do this, we have to have a better economic
> model, one more suited to the digital economics of our current world.
> The days of factory economics based on raw materials, production
> costs, capital costs, distribution costs, and so on are over. The
> new model must take into account such things as increasing returns,
> network effects, and integration / switching costs.
> Ta for now,
> jb

Stephen D. Williams
43392 Wayside Cir,Ashburn,VA 20147-4622 703-724-0118W 703-995-0407Fax 

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