Monopoly

What is a monopoly?
Today, a monopoly is defined as a single seller in a given industry (appropriately defined). There are massive problems with this definition which I will comment on below.

Are not all monopolies harmful?
Being a single seller, by itself, is not good, nor evil -- it depends on how one obtained that single-seller status. Did one obtain a monopoly by economic competition in the marketplace, or did one obtain it by political pull, i.e., lobbying? If such status is gained by competition in the free-market then the "monopoly" -- the successful business -- is good. If such status is gained by using the government, or Mafia, to force one's competition out of business, then the monopoly is evil. As all political intervention (initiation of force) in the marketplace is outlawed under capitalism, a harmful monopoly under capitalism is impossible. If one considers a monopoly by definition as intrinsically evil, then only "businesses" that obtain their market share by having their competition outlawed (as the U.S. Post Office does) can be called a monopoly.

What is the key to a proper discussion of monopoly?
The key is to discontinue the equivocation of the term monopoly--that is to use the term "monopoly" to refer to two mutually exclusive concepts: a company formed by economic power vs. a company formed by political power. There are two different concepts denoted by the term monopoly: (1) a company that has earned 100% share of a given market  (i.e., Microsoft) or (2) a company that has not earned its 100% market-share, but instead had the government outlaw its competition (i.e., US Post Office). The first should morally be praised--and the second should morally be condemned. By equivocating on the term monopoly and keeping it ambiguous it becomes an anti-concept so that: a company that has earned 100% share of a given market (actually Microsoft does not have 100% of the O/S/ market but has over 90%) is morally condemned. Such are the dangers of confusing economic power (Microsoft's power of production) with political power (the Post Office's power derived from coercion).

How does one judge a monopoly, or non-monopoly?
Observe what is evil here: the act of using the government to outlaw ones competition. It does not matter whether the government uses its power to outlaw competition to "protect" a single business, or to benefit a group of one hundred companies from a single superior competitor. Whenever the government outlaws an individual from entering and competing in any given industry it is evil and wrong. The criterion of judgment is: is competition (the freedom to produce and trade) outlawed in some respect (that is regulated) or not.

What happens when a company starts to make a higher profit in its industry, in comparison to other industries?
If any company is a single seller in any industry and starts making profits higher than other industries, due to high prices; it will attract competition into its industry, as other capitalists move their capital from less profitable markets to more profitable ones. If the profits are due to lower production costs, which other companies are unable to match, then the company deserves its profit.

What happens if a business attempts to charge prices higher than its competitors ("exploiting")?
If any business attempts to charge prices higher than the market will bear, he will lose all his business to his competition, since he cannot force his competition out of business. The businessman's power is dollars -- not guns.

What happens if a business attempts to charge prices lower than his competitors ("dumping")?
If a business attempts to "corner the market" by charging prices that are too low (i.e., below its' variable costs of production), the business may drive competitors out of the market temporarily (at the price of eating up its financial capital and eroding its profits); but, as soon as the business raises its' prices (in order to reap profits in order to build back the capital it has given away by selling products below their variable cost), new competitors will enter the market.

The only way a company can gain profitably gain market share by lowering its' prices, is if it can lower its costs of production. If a business can charge the lowest price because it has figured out how to build a better mousetrap (i.e., produce more for less), then it deserves whatever market share it can obtain.

How are all harmful monopolies created?
The sole source of harmful monopolies is the government, which is the only agency that has the power to physically force competitors out of business, i.e., it is the only agency that has the power to outlaw (i.e., regulate) competition. As evidence, witness the United States Post Office, which makes it illegal for anyone to charge less than 34¢ for first class mail (one entrepreneur attempted to compete by charging 5¢ -- he did not get far). Other examples include the East India Company of the 17th and 18th centuries, the American Pacific Railroads of the 19th century, and the AMA's monopoly over the prescription of medicine in the 20th century.

Only the government can physically force its competitors out of markets, or establish harmful monopolies through the granting of state "franchises". This is, of course, a clear violation of individual rights, since such state "franchises" prevent those who do not have "political pull" to enter the state regulated industry. In essence the "state franchise" is an insurmountable barrier to entry--and entry created by the the men in government. No businessmen (or government) can do this under capitalism -- only is such a feat possible in a mixed economy, or "totalitarian economy".

The only "force" a capitalist can use to put his competitors out of business, is the "force" of providing a better product at a lower price as judged by those who purchase his products -- such is the "power" of the businessmen. If this is how he achieves his monopoly, then it is in no way harmful. Just because something is a "monopoly" -- a single agent in a specified area -- does not make it evil. A proper government has a monopoly on the use of force, and it is an essential good to capitalism.

Are monopolies intrinsically evil?
As the term is used here, monopolies are not intrinsically evil (big is not inherently evil), nor are monopolies subjectively evil (good or evil judged by public vote, or polls); monopolies are good or evil depending on how they are formed. If formed according to the laws of the free market -- capitalism -- they are objectively good. If formed through irrational political policies they are objectively evil.

Is there such a thing as an "excessive profit"?
There is no such thing as a profit that is too high or too low. That is, there is no such thing as an "excessive" profit. There is only the profit that men earn.