Re: Coercive Monopolies in Technical Markets (Intro)

From: Gordon Mohr (
Date: Sat Apr 14 2001 - 12:56:27 PDT

Jeff Bone writes:
> Up front, Gojo: before critiquing my use of the material, maybe you'd like to
> read it? ;-)
> > Whoa! First, let's not equate objectivists and capitalists. Second,
> > I don't have a copy of that source, and it looks like you've removed
> > preceding context. "Such a monopoly..." would seem to refer directly
> > back to some unquoted antecedent, which is probably a monopoly backed
> > by violence or state force.
> Actually, I don't particularly like the term coercive in this context; even
> the objectivists use it in this context in an inflammatory and almost
> meaningless sense; the definition of "coercive monopoly" speaks entirely of
> effects rather than behavior which achieves those effects. No mention of
> violence or state force, though the larger context goes on to argue that these
> are the only causes of coercive monopolies. The important thing to note is
> that the definition of coercive monopoly is a separate thing from its
> speculated cause. Here's the immediately preceding context.
> "It is imperative that one be clear and specific in one's definition
> of "monopoly." When people speak, in an economic or political
> context, of the dangers and evils of monopoly, what they mean is a
> coercive monopoly - i.e., exclusive control of a given field of
> production which is closed to and exempt from competition, so that
> those controlling the field are able to set arbitrary production
> policies and charge arbitrary prices, independent of the market,
> immune from the law of supply and demand. Such a monopoly..."

Upon seeing the full quote, my objection stands. I believe this author
means, by "exclusive control of a given field of production which is
closed to and exempt from competition", someone who can violently or
legally retaliate against competitors. Not at all what you're saying,
that they have so much market power certain kinds of investors are
afraid to back competitors.

> I don't think Microsoft determines pricing from any kind of *competitive* price
> pressure, do you?

Yes, I do believe competitive threats are part of the pricing
decision. Each additional dollar they charge makes it more
likely their customers -- businesses and PC manufacturers
and individuals -- will use substitutes immediately, or begin
investing in substitutes for the future.

> > Look at what you're saying: that a coercive monopoly must exist everywhere
> > VCs choose not to invest. That's a nonsensical progression: VCs are only
> > a tiny part of the competitive matrix, and their investments indicate fads
> > as much or more than they indicate any underlying ability to make a living.
> Read the material. I'm not making this stuff up, I'm working directly from
> objectivist scripture. Greenspan's own argument is that capital investment is
> *the* --- singular, all-important --- check-and-balance against / regulator of
> the occurrance of coercive monopolies.

Well, I don't agree with Greenspan any more than I do with you; and
my point remains: VCs are just a tiny part of the competitive matrix.
They're also just a small part of the capital markets. Only if no one
can offer competing alternatives -- not hordes of loosely-coordinated
volunteers, nor coalitions of resentful industry giants, nor makers of
similar-repurposable products -- only then is competition "impossible".
Not simply because it's hard to get funding from the VC club.

> If you
> gerrymander the market segmentation, sure, you can claim that Microsoft is not
> a monopolist.

Or vice-versa, you can gerrymander the markets in the other direction,
and make them look like an invulnerable monopolist in some narrow,
mature market segments when competition for new markets is coming at
them from every direction.

> One hallmark of harmful monopoly behavior is in its use of
> dominance in one area to drive out competition in others. Even the most rabid
> free marketer with any experience in this industry at all must agree that
> Microsoft *does* in fact do that.

The most rabid free-marketers would say that Microsoft isn't
"driving out" competition, but rather using their earned
expertise and brand trust and the customer's love of integration
and single-source solutions from known companies to expand
their business.

That sets a high bar for competitors, but even so, plenty of investors
and individuals are doing just fine, enjoying themselves and making
good livings, tilting at Microsoft.

> I'm not making the argument you ascribe to me, though I indulge it a bit in the
> previous paragraph. I'm calling them a coercive monopoly because they meet the
> definitional test, no more, no less, and when I say it I mean specifically what
> it is defined to mean, which strangely enough doesn't have much to do with
> coercion. :-/ :-)

Then let me repeat my initial objection again, to wrap things up:

# We free marketeers should be very careful about
# calling anything short of violence or fraud "coercion".

When you use the word "coercive monopoly" to mean something
that "strangely enough doesn't have much to do with coercion",
then you're sowing confusion and doing harm to causes --
such as minimizing real coercion -- that I would think we
both hold dear.

- Gordon

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