If This Is Monopoly In Action, Bring It On

by Don Boudreaux on October 29, 2007

in Antitrust, Prices

Today I sent this letter to the Gray Lady:

You allege that Intel is guilty of “abuse of market power to protect [its] monopoly” (“F.T.C. Goes AWOL,” October 29).  Sounds terrible – until we read that Intel’s offense is to offer “big discounts and rebates to computer makers who minimize the use of processors made by rival Advanced Micro Devices.”  In other words, to keep customers, Intel keeps its prices low.

Monopolists raise prices; firms facing competition do not.  Intel keeps its prices low, meaning that it behaves competitively.  Yes, Intel’s pricing practices make life more difficult for AMD and other rivals, but that’s what competition is supposed to do.

Sincerely,
Donald J. Boudreaux

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{ 49 comments }

SaulOhio October 29, 2007 at 1:54 pm

As I keep saying, its the very things that businesses do to compete that get them labelled as "anticompetetive". As if a weight lifter working out an hour more per day than his competitors makes him "anticompetetive".

Scott Clark October 29, 2007 at 2:01 pm

Abolish antitrust laws; they are easily among the most perverse laws ever written.

Matt C. October 29, 2007 at 2:07 pm

Nice!

Rob Dawg October 29, 2007 at 2:42 pm

Monopolists raise prices; firms facing competition do not.

Where did this come from? Successful monopolies charge higher prices. That isn't raising prices and it may even mean lowering prices more slowly.

Would be monopolists most certainly do lower prices. This particular act is even more monopolistic in practice. Intel is seeking to influence behavior in choice with money. The word you are looking for but won't admit to is payola.

Michael Fisk October 29, 2007 at 2:53 pm

The only real wrinkle in this case in regards to the charge of "anticompetitive practices" and "predatory pricing" would be the fact that the semiconductor industry, due to its massive startup costs, does not have easy entry into or exit from the market. It's far from an ideal situation to promote perfect competition in.

That being said, if Intel's "anticompetitive" behavior is enough to drive AMD from the market, the Sunnyvale-based company will probably have someone else swoop in and purchase their assets if they believe that the competitive void is creating a position where noticeable profits can be made by entering in (Samsung has been talked about in such a role). Other questions then arise about possible disruptions of business upgrades being put off or otherwise disrupted by a fundamental change in the competitiveness of the market, but typically it is a situation where regulatory action should be taken only when the alleged monopolist starts actually, you know… behaving like a monopoly.

spencer October 29, 2007 at 3:06 pm

Successful monopolistic and/or oligopolistic firms set prices so that profits or rates of returns are just below the levels that would attract new entrants. There is no inherent reasons why these prices have to be either high or low. It depends on the barriers to entry. If the most significant barrier to entry is the monopolists cost advantage –in high technology industries that often stems from the monopolistic or oligopolistic firm being the first to enter the industry — their optimal pricing strategy may be to set prices so low that no one else can successfully enter the market.

Your view that monopoly or oligopoly prices are necessarily too high is based on an overly simplistic line of reasoning.

spencer October 29, 2007 at 3:08 pm

This is like your comments on the post office being a monopoly when it cost $0.42 to send a letter to Pittsburgh via the US mail but $8.96 to send it via Federal Express.

Clayton October 29, 2007 at 3:20 pm

The attack on Intel for being a monopoly power placing competitors out of the market has been made by a nonprofit, One LapTop Per Child (OLPC), too. OLPC sells their innovative XO laptops to developing countries' government at about $175 per comp (with the aim to lower the price to $100 in the next 3 years as mass production is carried out — currently costs are too high) to be distributed to children in those countries.

Intel has come out with their own version, called the Classmate PC, that is $285 and apparently not equipped with the same features offered by the XO.

Yet OLPC is throwing a huge fuss over it. A couple of news excerpts:
1) "Negroponte accused Intel of capitalising on his work, and said the Silicon Valley giant was deliberately
underpricing the Classmate to put extra pressure on OLPC. 'Intel should be ashamed of itself,' he told CBS News. 'It's just – it's shameless.'"
2)"What we have here is an infinitely powerful monopoly metaphorically threatening to break the kneecaps of a
non-profit if it doesn't 'get in line'," wrote AMD spokesman Michael Silverman in a letter published on the Barron's website.
3) "They have been very underhanded and destructive in the process of sales–theirs is a market, ours is a mission." – Negroponte

Maybe I'm missing something but a few contradictions stand out to me here:
- The Classmate isn't underpricing the XO. It's $285 vs $175. Nor does it seem to equal quality features. Why would a government choose it over the XO?
- "Infinitely powerful monopoly"? If they were infinitely powerful you'd assume they could lower their prices while providing a superior product. But then again that wouldn't make them a monopoly anymore would it.
- Intel is market-driven, OLPC is mission-driven: Shouldn't a mission-driven group welcome all opportunities to further their mission of supplying kids in developing nations with affordable and functional laptops? Sounds like thy are only mission- driven when they are the drivers of the mission.

shawn October 29, 2007 at 3:51 pm

spencer…the usps is a monopoly because nobody else CAN deliver first class mail in the way that usps does. as in, they're legally not allowed to. if other people were legally allowed to (just as AMD is legally allowed to make chips), but they chose not to, and the usps was the only people sending letters for $.42 (and, I'd bet that their real cost is a hell of a lot more than $.42, but the price is subsidized), nobody would cry "monopoly!" when the usps raised its prices, but that's exactly what's happening here.

shawn October 29, 2007 at 3:56 pm

clayton…the real issue is: how're we going to get cheaper laptops to kids in developing countries? If it's going to be done, and it's going to be done intelligently and efficiently, a for-profit will do it.

as you said, why would OLPC care that someone else is providing laptops? Isn't that the point? To actually provide laptops at a low price? …and they're going to complain that someone else is providing them?

And…how hilarious is it that AMD is complaining? I'm sure they have NO incentive whatsoever to push Intel's opportunities down…

spencer October 29, 2007 at 4:31 pm

shawn — the post office is required to cover its cost so it is not subsidized by the tax payer. It does not have to provide a return to investors and that is the only difference between it and a private firm.

Federal Express is not precluded from delivering a container containing a single one page letter to every individual and/or home and calling it something besides first class mail.

Billy October 29, 2007 at 4:57 pm

Spencer, without looking at the statute that creates the USPS monopoly, my first reaction is that Fedex would probably have substance over form problems in making the argument that it isn't providing first-class mail service. That could be dead wrong, based on what the statute says, but at the moment I'm too lazy to look it up.

holymoly October 29, 2007 at 5:12 pm

Holy moly, Boudreaux. Ever hear of "predatory pricing." Geez.

Chris M. October 29, 2007 at 5:23 pm

spencer-

The USPS is most certainly subsidized by the government. They are not required to pay any taxes, including taxes on gasoline. Since ground delivery is one of their largest expenses, I would bet dollars to donuts that subsidy makes quite a bit of a difference on their bottom line.

aschkan October 29, 2007 at 5:26 pm

Holy moly:

Predatory pricing is the Yeti of antitrust caselaw and economics, i.e. everyone knows what it looks like, but real evidence is scant and unlikely to ever turn up. From a corporate finance perspective, it's very difficult to sustain heavy known losses expecting to recoup outsize gains later, given that future dollars are worth less than present ones. Moreover, given our bankruptcy system, it's quite difficult to take capacity out of most markets (which by definition, monopolistic firms do). Even if Intel was to drive AMD completely bankrupt, some other firm could pick up its PP&E and IP on the cheap, and start a successor company, with an even lower cost basis than the original AMD, making it more competitive.

Tim October 29, 2007 at 5:59 pm

The last time I took econ, the whole purpose of pricing was to "influence behavior in choice." This stands for both producers and consumers.

happyjuggler0 October 29, 2007 at 6:20 pm

If the most significant barrier to entry is the monopolists cost advantage –in high technology industries that often stems from the monopolistic or oligopolistic firm being the first to enter the industry — their optimal pricing strategy may be to set prices so low that no one else can successfully enter the market.[emphasis added of course]

Spencer you make it out that low prices are a bad thing. Since when is it bad for consumers if a company has a policy that "we will not be undersold"?

Anyway, as it stands this may be (or may not be) the exception to the rule that antitrust laws suck and harm consumers. Not this particular instance (which is absurd if the company lives) of Intel vs AMD, but Intel vs AMD in general. Over the decades Intel has effectively let AMD live for antitrust reasons. This has meant that Intel has had a competitor, and as such it has also been forced to keep up with Moore's Law, more or less, or risk being usurped as top dog. It may well have continually lowered prices and upped processor speed and quality and variety anyway to broaden the market, or maybe not, we'll never know.

Andy Grove was/is a very smart person and I wouldn't bet against his ability to have been foresightful like that (there was always Apple to worry about, if only a little), but the antitrust law lovers may have a point in suggesting that prices wouldn't have been as low during the ride.

Of course the really big picture also includes the opportunity costs of the capital and brains at AMD over the past few decades that could have been used elsewhere and done wonderful things for consumers in a less pointless fight. I say pointless because AMD never had, and doubtfully ever will have, a chance to pay out dividends worth the cost of its wasted capital.

John Dewey October 29, 2007 at 6:35 pm

spencer: "Federal Express is not precluded from delivering a container containing a single one page letter to every individual and/or home and calling it something besides first class mail. "

Spencer, it has been a decade since I planned FedEx product and operational services, but I don't think the laws have changed much. Here's a few of the restrictions that effectively give USPS a monopoly on non-urgent mail:

1. FedEx or any private carrier must, by law, charge customers a minimum of twice the USPS priority mail rate or $3.00, whichever is greater;

2. FedEx and any other private carrier is prohibited from delivering mail to ordinary boxes labelled "U.S. Mail" or boxes used for delivery of USPS letters;

3. Senders are prohibited by law from using FedEx or any private carrier for sending "non-urgent" letters, and a couple of firms have been fined by the government for doing so;

4. extremely urgent letters traveling within the 48 states must be delivered within 12 hours or by noon the next business day.

There are many more restrictions contained in the Private Express Statutes

The restrictions above effectively give the USPS a monopoly on U.S. non-urgent mail.

Don Edwards October 29, 2007 at 6:46 pm

Rob Dawg: but typically it is a situation where regulatory action should be taken only when the alleged monopolist starts actually, you know… behaving like a monopoly.

What, wait until a crime is committed before inflicting punishment?

Next you'll be promoting some silly standard like "innocent until proven guilty", I bet.

I think you've forgotten, or perhaps never realized, what the modern American regulatory state is all about.

(Now hand me a crowbar, please, so I can get my tongue out of my cheek.)

Billy October 29, 2007 at 7:05 pm

holymoly,

Not only has Don heard of predatory pricing. He's done a pretty good job of debunking the fear of it.

shawn October 29, 2007 at 7:39 pm

it really is phenomenally unbelievable to me that people think that a simple, one line answer will 'refute' the writings or words of a well-studied professional in this or that field. Now, granted, I think socialism is bunk…but even the most socialist thinker can't be written off by a single sentence uttered by some joe schmoe.

"have you ever heard of predatory pricing?"

Yes. Of course. Goodness. Perhaps, just perhaps this professor of economics has even said something about it.

Now…it's fine to ask about something that seems obvious, a la:
"This seems so obvious, that I realize there must be a problem with it, or at least that you would somehow disagree with the idea: Predatory pricing."

See? there's no arrogance there, when you have no right whatsoever to be arrogant about something that someone very likely knows more about than you do.

Chris October 29, 2007 at 8:18 pm

While I don't agree with Don's sweeping negative view of antitrust law, I agree on this one; predatory pricing is not something to worry about. Suppose Intel manages to drive AMD out of business by pricing its chips below marginal cost. It would only do that if it thought it could make up that price after driving AMD out of business, by pricing well above its marginal cost. The problem, of course, is that as soon as it prices its chips above marginal cost, new competitors will enter the chip market.

holymoly October 29, 2007 at 9:00 pm

So, Shawn. How do you know I'm not also a *professor of economics* — but one who simply thinks a ridiculously uni-dimensional statement like "Monopolists raise prices" deserves nothing more than a glib one-liner?

holymoly October 29, 2007 at 9:05 pm

aschkan –

Good post, and good point. However, Intel's predatory behavior isn't simply to deny oxygen to AMD. It signals to other potential entrants that their fixed costs will never be recouped — thus raising the barriers to entry into this industry even further. Intel and AMD are probably more than happy to share their duopoly rents. Hard to prove? Yes. Real phenomenon? Also yes.

holymoly October 29, 2007 at 9:20 pm

Billy –

Seriously? You think that testimony is a persuasive "debunking" of predatory pricing? It's a toy-model argument about the airline industry (full of assertions and completely devoid of empirical content). First off, the argument does not consider predatory pricing as a threat/deterrent to entry. Second, it's a wee bit easier to purchase a bankrupt airline's equipment and gates than it is to reassemble (or assemble in the case of potential entrants) the R&D brainpower of a chip manufacturer. So, the testimony — even if persuasive, would be completely inapplicable to this argument.

holymoly October 29, 2007 at 9:30 pm

Chris — so, when Intel launches its latest Xeon processor at $1100 per, is *that* their marginal cost? If so, when they cut their prices for that chip by 30% the following quarter (because AMD undercut them), is that their marginal cost too? Or do we see the p=MC in the next quarter, when Intel introduces a new high end chip and cuts the (formerly) latest and greatest Xeon price again?

Or did you mean long-run average cost?

Look, I would agree that there is competition between Intel and AMD. But they are dancing the dance of some lovely 3-player game (3rd player being the nascent competition) whose equilibrium hasn't been given a name yet. But I can pretty safely say that such equilibrium, when compared to a well-functioning market, entails higher total profits and (possibly — I'm not as sanguine here) lower total innovation as well.

M. Hodak October 29, 2007 at 9:54 pm

"It's a toy-model argument…"

No, it's a testable hypothesis. Notwithstanding the arguably limited applicability of Don's airline industry example to microprocessors, Section 2 of the antitrust code has been around for over a century. That's plenty of time for an example of monopolistic recoupment to have been surfaced somewhere.

So, holymoly (or anyone else who'd like to show off their econ/law credentials), show me one example in the history of antitrust law–U.S. or European–where it was proved in court that a company even had a hope of recouping predatory losses. Just one, please.

M. Hodak October 29, 2007 at 10:02 pm

BTW – I'm aware that holymoly has also offered the argument of those who have given up on straight recoupment, i.e., "strategic" predation. But, I'd like to at least get agreement that the original theory of predation, i.e., recoupment after losses, i.e., the theory behind Don's post, is dead.

True_liberal October 29, 2007 at 10:20 pm

It's well known that CVG (Cincinnati) has some of the highest to/from airfares in the US.

It's also well known that Delta has a near-monopoly on airline flights at CVG, and has been able to undercut any "pretenders" that have attempted to start up there.

But travelers also know that at least four other airports within 120 miles have much more competition, and lower fares; thus the long commute is often worth it.

holymoly October 29, 2007 at 10:25 pm

M. Hodak -

I have no law credentials, so take with a grain of salt. But, my understanding is that since the Brooke Group case established the standard, there has not been a single instance of recoupment proven in a court of law in the U.S. There seem to be other Section 2 violations that are much easier to prove, so why should a plaintiff risk summary judgment by alleging predation? In Europe, I think they use the price-cost test (or per se standards in the case of a firm with established market power) in lieu of recoupment, so there would be no reason for a plaintiff to go that route (though I think arguments were made in the French Telecom case).

Does the failure to prove in a court of law mean that predation does not exist? No. The "beyond a reasonable doubt" standard applicable in a court of law is not applicable as a test of reality. Just ask O.J. Simpson.

"If you can't recoup, your case is poop."

vidyohs October 29, 2007 at 10:30 pm

Don't know guys, you all talk over my head because I am just a simple guy that learned his economics in the street.

Predatory pricing, monopolies, etc.; Lions, Tigers, and Bears, oh my.

I discovered long ago that there are things I want and there are things I need.

The things I need are very damn few, and the things I want do not constitute a very long list. This simplifies my view on life and the world a whole lot.

I learned some time ago that when I go into a store, any store, I am not seeing prices. I am seeing offers.

There is a difference, and that difference is determined by me. It doesn't become a price until I accept it. This is true of a can of peas on the shelf of Walmart or that Mercedes on the showroom floor. What I found was that generally there is very little firm offers, virtually all is negotiable……oh yeah some people refuse to bend….but I have the choice of walking away because my needs are few and simple.

In fact I just laugh in a lot of cases and pull the money out of my wallet and wave it while telling the merchant, "See this, it is going down the street to someone else who will treat me the way I want to be treated." Some pretend they don't care, but most become more flexible, especially if their product, if sold, puts a lot of profit in their pocket.

You can say that they can predatory price me out of the market or monopolize so thoroughly that I can't help but buy from them, and I tell you it isn't true. There will always be an enterprising person willing to risk to bring me what I need cheaper than the monopolizers…..always.

The consumer has the money and therfore always has the ultimate power….so many people forget that or never learn it in the first place.

Modern electronic devices are wonderful and I enjoy them immensely, but I lived without them in the past and can still do so if necessary.

holymoly October 29, 2007 at 10:36 pm

Ladies and gentlemen… Vidyohs has just left the demand curve.

Sam Grove October 30, 2007 at 1:06 am

When I got my first computer, way back in 1991, I spent $1,800 for a 33 MHz cpu, 4 MB of RAM, and 208 MB hard drive, and a 15" crt monitor. After years of minimal government interference in the computer technology market, my current system consists of a 2.5 GHz dual core cpu, 2G of RAM, two HDs totalling 700G of storage, a video card more powerful than my original computer, and an LCD monitor, all together which cost less than $700.

This enormous reduction in price despite the monopoly government's inflation induced devaluation of the dollar.

It's just amazing to hear people warn about the dangers of business monopoly, calling for our salvation by the one true monopoly, political government.

What a disconnect.

Gil October 30, 2007 at 2:00 am

Actually I thought the most dubious and dangerous monopoly (where the businesses in question are price-makers rather than price-takers) is that of an isolated locality. E.g., cruise ships, sports stadia, mountainous regions, etc., not so much the large-scale multinational corporation.

vidyohs October 30, 2007 at 6:16 am

HolyMoly,
I lost traction and careened off, but I am hanging tuff on the supply bend.

Gil,
Oh my Gawd! We agree. That is kind of what I was trying to say. In my view most of what we would call monopolies will exist in areas where desire or want is the ruling motivation for buying. Needs can be taken care of with relative simplicity and relatively cheaply (IMHO).

It matters not in the least if Norwegian Cruise lines is the only cruise line and can set its prices at whatever they want…..if you don't care about cruising and can live without it. The same holds true of Reliant Stadium and its fees for seeing a football game…..I have never gone and will never go….so the prices are irrelevant to me and I laugh at the people who bitch but still buy and go.

But we disagree about it being dangerous. Reliant stadium or Norwegian Crusie lines hold no power over me, they can only advertise. I am impervious to the inticements of advertising. I suggest that advertising is only dangerous to weak and uneducated minds, so don't fear monopolies in areas where you only have desire and not need.

holymoly October 30, 2007 at 8:01 am

Sam Grove:

The true counterfactual is unknown. Just think of what you'd actually be using now if there were real competition in the microchip industry. The hard-drive and memory industries are much more competitive — and there's where the major gains have come. Sure, processors and memory controllers are faster now — but I would argue that it's the advances in memory and storage that have propelled computing productivity.

BTW — I'm guessing that in 1991 you probably weren't using the Internet as much as you are now. You know, that communications network developed by the Federal Government. Oh yeah — the browser you're using to surf the internet is based on government-funded research. Oh, one more thing — think of what a wonderful place the internet would be if AT&T owned all the fiber. Thank you Judge Greene!

wintercow20 October 30, 2007 at 9:49 am

"think of what a wonderful place the internet would be if AT&T owned all the fiber."

Assuredly a better place than if Uncle Sam owned it all. Anyway, only a very few number of firms still own the fiber.

And you seem to be overlooking the fact that even if AT&T owned all of the fiber, that would not prevent new companies from thinking of other ways to deliver internet services … perhaps wirelessly.

holymoly October 30, 2007 at 10:17 am

wintercow20 –

"Assuredly a better place than if Uncle Sam owned it all."

Holy strawman, Batman! Who said anything about government ownership?

"And you seem to be overlooking the fact that even if AT&T owned all of the fiber, that would not prevent new companies from thinking of other ways to deliver internet services."

It wouldn't prevent them from inventing a magic time machine to go back and steal the plans for the erbium-doped fiber optic amplifier either.

Point being, any time anyone got close to investing significant capital in inventing such an alternative technology, a monopolist fiber-owner could push down the price of service enough to deter entry. Maybe 2 years down the road, someone gets lucky and invents a new magic technology that supplants the fiber — but it may be 10, 20 or 100. In the mean-time, the monopolist earns rents by restricting supply and elevating price — to the detriment of consumers and commerce overall.

John Dewey October 30, 2007 at 1:37 pm

holymoly: "You know, that communications network developed by the Federal Government. "

Can you explain this, holymoly? Why do you say that the Federal Government developed the internet?

Sam Grove October 30, 2007 at 1:46 pm

think of what a wonderful place the internet would be if AT&T owned all the fiber.

They once did own all the wire, thanks to government fiat.
I won't bother commenting on the other points, as they have been dealt with here a number of times before.

Sam Grove October 30, 2007 at 1:48 pm

I wondered what became of muirgeo.
Reincarnation!

holymoly October 30, 2007 at 2:00 pm

"I won't bother commenting on the other points, as they have been dealt with here a number of times before."

Inadequately, no doubt.

Sam Grove October 30, 2007 at 2:01 pm

BTW, it is also interesting how the use of collective nouns leads people to hold 'the government' does this or that rather than actual people engaging in a process behind the curtain of 'the government' hence we can drop bombs on far off lands without ever suffering a pang of guilt or, especially, without ever having to be held accountable because 'the government' does, not actual real live people pulling triggers or punching buttons to launch armament against other people.

As far as processors, I would argue that they have become much cheaper when you consider inflation AND computing power.

I purchased my mother board and cpu in a combo deal for $130 dollars.

Let us not forget other chip makers such a Motorola and also that many other chip companies exist that could make processors if they found it profitable. Why would anyone think that only Intel and AMD have processor making capability?

holymoly October 30, 2007 at 2:15 pm

Sam -

Since 1991, your Intel CPU has increased in speed 75-fold. Impressive!

But your RAM has increased 500-fold, and your HD storage has increased 3,365-fold.

I *love* real competition!

BTW — I looked up muirgeo, and I'm honored to be compared to him/her.

holymoly October 30, 2007 at 2:20 pm

Sam –

"Let us not forget other chip makers such a Motorola and also that many other chip companies exist that could make processors if they found it profitable."

They do, they just don't compete in Intel's territory (nor does Intel compete in Motorola's territory — cell phone controllers). Hmmm… Maybe you should be asking yourself why the global market for logic chips seems to be so… well… "parceled" out (if you get my drift).

John Dewey October 30, 2007 at 2:38 pm

holymoly,

The origin of the internet is a subject of great controversy. The one book you cite is not the only opinion that matters.

Bob Taylor was one of two people at ARPA who decided to launch ARPANET. Here is Taylor's opinion:

"The ARPAnet was not an internet. An internet is a connection between two or more computer networks."

ARPANET was also not the first implementation of a packet switched network. Donald Davies in the UK first implemented a packet switch connecting a network of host computers.

Some historians credit AT&T with playing a key role in developing the internet. Certainly it was AT&T and not the government that developed digital switching. It was AT&T that developed UNIX, the operating system for both ARPANET and the internet. It was AAT&T that developed the C programming language that is basic to much interent software.

The previously mentioned Bob Taylor believes the internet started as a commercial application, not as a university or government funded project:

"I believe the first internet was created at Xerox PARC, circa '75, when we connected, via PUP, the Ethernet with the ARPAnet. PUP (PARC Universal Protocol) was instrumental later in defining TCP."

holymoly, I am not disputing the points you made about government-funded developments. But I do not accept your claim that the Federal Government developed the internet.

Others share this view:

So, who really invented the internet?

holymoly October 30, 2007 at 2:45 pm

John Dewey –

Thank you for a cogent and convincing argument. You caught me employing hyperbole, and I accept your gentle correction. Clearly, the Internet as we know it has been a joint public-private sector development with a complex history.

Cheers.

Bill October 30, 2007 at 4:31 pm

The interesting thing about Intel and AMD is that AMD is the only other competitor who can compete with Intel unencumbered by patents. If AMD went under, then Intel would have a government enforced monopoly.

Fact of the matter is that (1) Intel makes most of its money from flash and (2) IBM sells more high-end chips. For historical reasons the global economy is highly dependent on Intel "x86" chips, though in quantity they're quite rare. No amount of academic hand-waving would easily extricate the market from Intel's grip if AMD went under. AMD until the past few quarters was actually incredible competitive, and profitable, despite amazing odds against them. Intel can subsidize their low prices with flash sales. When the economy downturns–like it is at the moment–AMD catches a worse cold.

If the capital markets were really so smart, AMD would have had more access to capital to expand their flash production (they are quite good chips producers, after all). Instead, they remain under the tutelage of Samsung, the largest manufacturer. And Intel has a large enough economy of scale to muscle through the extreme peaks and troughs in the flash and CPU markets.

These anti-trust arguments are better to make with widgets than at the bleeding end of the economy. If we're all so anti-government lets get rid of patent encumbrances. I'd vote for that, and in return would vote for dismantling the anti-trust machinery.

Or are we instead going to make the same tortured arguments people having been making for anti-trust: "Its complicated. We need them for the market to function properly. blah blah blah".

Bill October 30, 2007 at 5:27 pm

The amazing thing about the Internet is that its young enough that one needn't employ secondary sources. If you're familiar with Usenet then you should feel free to hit up groups like comp.lang.c, comp.unix.programmer, and various other pre-blog forums. There you'll find many of these same people you quote; certainly people they worked with.

Ultimately, what birthed the Internet is insight into the nature of cooperation: packet switching shares wires, "Internet" shares networks. Unix was developed at AT&T, but what made it the "Internet" operating system was shared labour at Berkeley and around the world. TCP, DNS, SMTP, FTP, HTTP, et al were originally designed and implemented as freely available, unencumbered software, and remains so, more-or-less. MS Windows, for instance, took the BSD Unix TCP/IP code and embedded it in its own OS. Internet Explorer, similarly, came from Mosaic, a freely available application.

Indeed, by "free" I don't mean "no price" (though often its concomitant when there's insufficient potential for value-add exploitation). I mean freely re-distributable, with unencumbered access to the source code. There's no better way to develop interoperable systems then to see the code of the other systems, as opposed to parsing an obtuse technical document.

Abstractly, this comes down to free movement of information. The Internet moves bits-and-bytes. But the real value is in fostering movement of bits-and-bytes which convey substantive information–knowledge–which enhances the capabilities of market actors in ways unimaginable to the previous walled garden structures.

Indeed, that knowledge is more accessible and mobile than ever before is the material support for anti-anti-trust positions. If economic actors were stymied by structural hinderances to free, *shared* information (so one cannot be defrauded–little "l"–by asymmetrical access to knowledge) there would be no ground to stand on.

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