Monopolists are perfectly impedence-matched with bureaucrats

It's really easy to understand the perspective of the companies that own the giant buildings down the street, especially when the other side is a bunch of weird new businesses that want to do stuff no one has done before.

And if you're a bureaucrat looking to make new rules, why not ask the companies that currently dominate the sector what they should be? After all, who would know better?

This is not just a case of corruption but also about what is convenient and comprehensible to a politician or civil servant. If they want something done about climate change, they have a chat with the oil companies. Obesity is a problem to be discussed with the likes of McDonald’s. If anything on the internet makes a politician feel sad, from alleged copyright infringement to “the right to be forgotten”, there is now a one-stop shop to sort it all out: Google.

Politicians feel this is a sensible, almost convivial, way to do business – but neither the problems in question nor the goal of vigorous competition are resolved as a result.

One has only to consider the way the financial crisis has played out. The emergency response involved propping up big institutions and ramming through mergers; hardly a long-term solution to the problem of “too big to fail”. Even if smaller banks do not guarantee a more stable financial system, entrepreneurs and consumers would profit from more pluralistic competition for their business.

No policy can guarantee innovation, financial stability, sharper focus on social problems, healthier democracies, higher quality and lower prices. But assertive competition policy would improve our odds, whether through helping consumers to make empowered choices, splitting up large corporations or blocking megamergers. Such structural approaches are more effective than looking over the shoulders of giant corporations and nagging them; they should be a trusted tool of government rather than a last resort.

Monopoly is a bureaucrat’s friend but a democrat’s foe [Tim Harford/FT]

(Thanks, Tim!)

Notable Replies

  1. dobby says:

    I dig the radio terminology, nearly perfect analogy.
    Pssst, pass it on.

  2. This problem became obvious with the old Atomic Energy Commission, which was so nuclear-cozy that it had to be renamed to the Nuclear Regulatory Commission to remind itself that it had an actual public-safety job to do in addition to promoting the use of peaceful atoms.

  3. I can actually see the point of view of Congress. One day you're a successful dentist or something, and the next thing you know you've been elected and they're putting you on the House ag committee. Sure, you're from Iowa, but what does a Des Moines dentist know about farming?

    Day one, two guys are waiting in your office. One seems to know everything about agriculture, in fact he knows the names of your kids and what team you like. He's in a really great suit, and can't wait to take you to the best place in town.

    The other guy looks like a hippie. What do?

  4. We libertarian right-wing nutjobs have been complaining about this for years. We've especially been emphasizing the tendency of regulator--monopolist tag team to suppress competition. This is sometimes accompanied by high-sounding rhetoric about protecting the public against the upstarts.

  5. I didn't read the article, just the quotation, but it looks like what they might have done is not mention any kind of libertarian principles. I think lots of people have known about this problem for years, but it is a problem that is at its worst in the US and doesn't seem to ruin as many lives in countries that people perceive to be more heavily regulated. Norway did a remarkable job of not letting oil companies dictate terms to it, while the US let's large companies basically write their own laws.

    The problem isn't that government is bad, the problem is that when a small number of people control too much wealth, they will control the society whether it is ostensibly a democracy, a dictatorship, a monarchy, a libertarian paradise, or a hippie commune.

    And the simple fact that rich people get what they want is why this position hasn't been taken seriously from libertarians. It's because the libertarian ideal doesn't include controls to ensure that individuals or small collectives can't amass wealth and take over society so a society built on the principle of liberty and minimal regulation will (in the belief of non-libertarians) simply devolve into the same state, with a few powerful rich people dictating terms to everyone else. In anarchy this is done with guns, in democracy it is done with lobbying, in a libertarian society it seems like it would be done with lawyers (more money to hire better lawyers means never having to keep your contracts and being able to force others to keep theirs, for example).

    This article just explains one of the mechanisms through which money buys power even in absence of corruption. There are many. But you can't solve that problem by removing government, because money buys power in every single other sphere, and government is one of the very few things that can actually stop the money/power from being accumulated in the first place.

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