In preparing some of my letters-to-the-editor for publication in book form, I ran across this one, to the Washington Post, that I somehow failed to post here at the Cafe back when it was first written in February of last year:
Barry Lynn complains that Reagan-era easing of antitrust regulations has resulted in oppressive monopolies: “The seemingly endless variety of products in our stores is controlled by an ever smaller number of immense trading companies that, increasingly, charge us higher prices” (“American small businesses needn’t go extinct,” Feb. 21).
Mr. Lynn’s reasoning and facts are shaky.
First, true monopolists – having no need to attend carefully to consumers’ desires – don’t bother offering an “endless variety of products.”
Second, as a quick perusal of Table 3 in the attached document from the Bureau of Labor Statistics will show, inflation-adjusted prices of a great many goods and services are today lower than they were 25 years ago. The real price of household furniture, for example, is down 43 percent over the past quarter-century; that of household appliances is down 64 percent; that of tools and hardware is down 60 percent; that of new cars is down 36 percent; that of apparel is down 46 percent; that of nonprescription drugs is down 54 percent; and – get this! – the real price of information technology, hardware, and services is down a whopping 96 percent.
Sincerely,
Donald J. Boudreaux
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{ 75 comments }
I wonder why the price of healthcare isn’t dropping as quickly?
It must be the General Hospital monopolization! End capitalism!
You got everything right except the last word.
heh heh. Not according to the democrats
Who’s to say it hasn’t? Yesterday’s technologies are cheap whereas the latest technologies are expensive. Since much more diseases are treatable then even a few decades then it can be argued that medical have gone done overall but everyone’s only taking notice of the latest medical technologies.
Your facts are right Gil, but the biggest reason healthcare costs haven’t dropped is that there’s almost always a third party payer involved (an employer, insurance company, or the government). And no one spends someone else’s money as wisely as he does his own – neither the doctor or the patient have any incentive to keep the costs down.
As proof, look at the few areas of medical care that aren’t typically covered by insurance, like LASIK or cosmetic surgery. Huge declines in their prices over the past few years.
And health care isn’t the only industry where this happens. K-12 education and and even college education have costs that rise quicker than inflation because a high percentage of those costs are paid by third parties that do not have strong incentives to ration.
Don, please don’t confuse the issue with facts. Big businesses are monopolists, and thats that! They have to be cut down, even if they are providing us with a wider array of better quality of consumer goods at lower prices and a larger supply. They are monopolists, and they reduce selection, quality, supply and raise prices! They MUST be stopped!
Damn your facts!
And by supplying more, they use more energy and so create more CO2 – by making things better and better and cheaper and cheaper they are allowing even riff raff to enjoy what elites used to enjoy – so how dare do these capitalists make extraordinary things for ordinary people to enjoy
Take plane travel – these engineers are always innovating and building engines that are more efficient – run longer, use less fuel – so it is now possible for the riff raff to fly across the country – across the world – and so they have made plane travel more common and allow riff raff to travel wherever they want to for prices they can afford
The real culprits are the innovators – if only they stopped innovating – we can all stop and catch our breath and hold on to what we have and not make it all so common that what we have is not exclusive anymore
Congress should pass a “Moratorium on Brains” – No new products or R&D for a period of 10 years – to be extended as need be
The Precautionary Principle will do that, Krishnan. Expect it soon in your neighborhood.
Apply the precautionary principle to healthcare costs!
Mr. Lynn was probably confused by the difference between real and nominal prices. What that difference tells me, incidentally, is that a large part of nominal price increases if probably due to monetary inflation, caused by… the government!
So, if I were to address Mr. Lynn, I’d say, you’re right, there is a monopoly that is driving nominal prices up, and it’s the government. So we should dismantle that monopoly that ceaselessly dumps new dollar bills into our economy so that monetary inflation ceases, and nominal prices fall in line with real prices.
Such an argument probably strikes at the core of his beliefs though, so his confirmation bias will probably rear its ugly head and ignore the argument (that is, if he care to ponder the disconnect between real and nominal prices in the first place).
What Mr. Lynn was confused about was the seemingly endless variety. Look at all those office software suites. There’s Microsoft Office, Microsoft Office for Mac, and, oh, wait. There must be more. I’m still using Office 2002 because the later ones offer the mortal user NOTHING worth “upgrading” to. I use XP, too, for the same reason. And yes, I use Windows despite the seemingly endless variety of operating systems that will run the seemingly endless variety of office suites on any one of the seemingly endless choices of personal computers (called “clones” for a reason).
Open Office… Freeeeeeeeeeeee of use…. As in no transfer of compensation from user.
Don’t forget about Google Apps.
He-know-nada,
Your ignorance =/= lack of variety.
http://www.pcmag.com/category2/0,2806,4822,00.asp
http://en.wikipedia.org/wiki/List_of_operating_systems
He-know-nada,
Your ignorance =/= lack of variety.
office suites reviewed by PC magazine:
http://www.pcmag.com/category2/0,2806,4822,00.asp
He-know-nada,
Your ignorance =/= lack of variety, part 2
Operating systems list:
http://en.wikipedia.org/wiki/List_of_operating_systems
Nemoknada,
“There’s Microsoft Office, Microsoft Office for Mac”, OpenOffice, LaTeX, Adobe, iWorks, SSuiteOffice, WordPerfect, EasyWord, Corel, GoogleDocs, TextMaker, KingsoftWriter, AbitityWrite, RagTime, Gnumeric, KSpread, LibreOffice, NeoOffice, EditGrid, iRows, JotSpot, ThinkFree, Spreader, numberGo, Lotus, Quantrix, Resolver One, …. Well you get the point. And this is what I found in less than 90 seconds online.
You see, Nevmoknada, you work in a world of darkness directly related to your ignorance. If you took the 90 seconds it took for me to find the short list above you would see just how ignorant you truly are.
But the odd thing about your comment is that you know how stupid your third sentence is because you say this: ” the seemingly endless variety of operating systems that will run the seemingly endless variety of office suites on any one of the seemingly endless choices of personal computers”, but the lazily (intellectually) dismiss this wondrous variety with “called ‘clones’ for a reason”. Something I have never heard Linux or Mac called.
What you’re saying is that Civics, Mustangs, Range Rovers, Wranglers, etc are all “clones”. In other words, you’re a jackass.
Regards,
Ken
The word “clone” is correctly-used, if a bit unusual these days. “Clone” was the standard term for PC-compatibles not made by IBM, until probably the mid-1990s, I suppose. Perhaps even “PC-compatible” is old-fashioned these days, now that everything is a PC-compatible. Even the Mac is a PC-compatible. I bet workstations and servers are just (expensive, fancy) PC-compatibles these days too. What would be the point of doing anything else?
Compared to the variety available back then, most computers are basically the same. I can put a Windows XP disc in my modern Macbook, and it will boot, and run the installer. Same with Linux. No emulation required (just a small amount of initial assistance to work around XP’s non-support for EFI – I don’t think you even need that bit for, e.g., Windows 7). That’s because there’s about as much difference between my Macbook and my PC as there is between one PC and the next. Some, yes… but not much.
Despite this lack of variety, the situation today is a vast improvement.
You appear to confuse compatibility with a variety of operating systems / software packages with a lack of variety. They are two very different things. A wide variety of hardware exists, and due to market forces, most of it is capable of running most or all of the wide variety of operating systems / software.
yet another Dave
Your right. If Apple had it’s way, you could only run Apple software on its computers. But thankfully, for market forces and the power of consumers, they can’t do that. Apple is forced by it’s consumers to make more choices available.
Right now the same thing is happening in the App Store market, Apple doesn’t want to compete, so it’s trying to sue, but that’s not going to stop Google, Amazon, Barnes and Noble from producing their own app stores, which in 2 years I expect all IOS products to support, not through court rulings but because consumers want choice.
And yet Microsoft still has to innovate to stay on top. As the other have already pointed out, their is a lot of choice with office doc programs, the only hindrance is information about what’s out there, which if you were to Google search (relatively free cost but requires at least a minute of your very valuable time) will tell you what’s out there.
Microsoft is a perfect example of why the Democratic/Liberal notion of Monopolies is flat out wrong. Microsoft “was” the big boogyman, before Google came along, that was going to take over the world is some sort of Corporatist/Government Fascism. At least that’s what liberals used to say.
Now, not so much, they are trying to compete in a very competitive smart phone market. Their operating system is going through another iteration this year, making 2 in the last 5 years. Two things a true monopoly, at least the dem/liberal vision of one, would never do.
One thing Microsoft does have going for it, is that they are constantly trying to innovate and compete for customers by offering new products and new services. They aren’t trying to pull an Apple and take their competitors to courts.
I always find it funny that Libs/Dems use Microsoft and now Google as the boogyman but I’ve never seem they talk about Apple being a Monopolistic boogyman, which for a short while it almost was in the Smart Phone market. Maybe because they are all getting on the internet on an Apple device, that if they got their trade policies passed, they wouldn’t have access to in the first place.
His point was to bash “Reagan-era” policies — not to say anything substantive.
Mr. Lynn likely confused nominal and real prices. Of course, the differential begs the explanation of inflation.
Mayhaps Mr. Lynn is right about the monopoly, but wrong about the focus – there is a monopoly, but on money supply. End that monopoly, and maybe nominal prices and real prices will move in sync.
Or rather, the only currency effect on the nominal prices of goods will be simply due to the shifting concentrations of the monies that the goods are denominated in. And to the extent that isn’t true, it will be the choice of the consumers who use that particular money.
I agree. There are countless detractions the Monopoly imposes on an otherwise free economy, but its monopoly on money is perhaps the most intrusive.
The irony is that the purpose of these false accusations of monopoly is to increase the scope and power of the one true Monopoly.
What’s the point in all these reduced prices if people don’t even have jobs.
If household appliances, for instance, are 64% cheaper now than 25 years ago, even if 10% of the population can’t find work, the 90% who can are buying goods at such reduced prices that society is still richer on the whole. You may object that such riches aren’t being fairly distributed if the 10% who can’t work aren’t able to buy them, but unemployment, like all imbalances between quantity of a commodity supplied and quantity demanded, is a consequence of prices for labor (read: wages) being too high. Allow the wage to fall and the labor market will clear. Unless you would propose the wage would have to fall by a full 50% to clear, we’d still be able to consume more at the lower wage with the higher levels of production than we did back when goods were provided by woefully inefficient mom-and-pop businesses.
“Allow the wage to fall”?? Never sayeth the progressives whose approach to prosperity is through increasing the minimum wage to $250/hr (or greater)
“Allow the wage to fall and the labor market will clear. ”
Yeah, instead of being unemployed, they should merely be impoverished. Then they’ll REALLY appreciate them low prices for baby formula!
One can only chuckle at the zillions of ways the regulars here have of putting “I got mine, you get yours” up on stilts.
Wages fall, and items are no longer being purchased at the prices when the wages were higher…… And those prices will fall or no sale.
Living wage? Any compensation is a living wage.
VV and the other old fogies had the 5&dimes, we have the dollar stores. These businesses reflect the opportunity for profiting from those at lower wages.
Higher minimum wages do reflect the ‘I got mine, now get yours’, as higher minimum wages often reflect less employment. Those employed get an increase and this unemployed have less opportunity.
“VV and the other old fogies”
Who are you calling an old fogie, kiddo?
“I got mine, you get yours” is the attitude of people protecting their high wages and accordingly impoverishing the people who can’t get work.
I graduated in 2008 with a degree that’s now worth crap. If wages were actually driven by market forces, I could walk into a place of employment and tell the boss to fire someone and give me his job because I’m willing to work at a lower wage-to-productivity ratio than he is. That’s effectively illegal for the lion’s share of employers to even consider. The people who “got theirs” are the ones who have jobs with wages above market equilibrium by protecting themselves from having to compete with people such as myself, whom they are screwing. People deriving economic rent from minimum wages, unions, state laws prohibiting at-will firing, et cetera, are not the victims, they’re the victimizers.
Statists need to get this through their heads. Unemployment is correlated to wages. All else held equal, you cannot force up the wage via the law without also forcing up the level of unemployment. If you want to whine and wail about the people labor-laws are impoverishing, please try to correctly identify which group it is which is being impoverished.
I’m sorry, I have to ask: what’s this degree that’s worth crap? Because something good is happening between your ears, so I doubt you’re permanently impaired.
While I agree with you economic rent rant, I think you may be off on the part of the analysis where you believe you are willing to work for a lower wage-to-productivity ratio. I think you may have the wage part right, but may be off on the productivity part.
Methinks: Egyptology, if you’ll believe it. I can’t work in my field without a higher degree, and businesses just don’t seem to want to hire the generic college graduate anymore.
OMG, Tim, how interesting! That’s an unusual degree. You seem pretty smart, I’m sure you’ll figure things out. Good luck.
Nemoknada,
“instead of being unemployed, they should merely be impoverished.”
Are you really claiming that earning something is just as bad and possibly worse than not earning anything at all?
Regards,
Ken
“wage to fall”? Even $7.25/hour is not a living wage much less providing the ability to buy a new appliance.
What the hell is a “living wage?”
A ‘living wage’ is anything more than what you already are being compensated.
Whatever effectively stifles competition to union labor.
When you swear, I get horny. You are soooo bad!
http://en.wikipedia.org/wiki/Living_wage
I thought I was the only ignorant one around here. Guess not!
An arbitrary term…. used to promote propaganda.
Unions and democrats would bash the federal minimum wage as not being ‘livable’. Yet, people live on it. And, millions have lived on less. Less, we forget the lowest wages have been relegated to those that are the newest to the workforce or those who have little to no skills. And, a low wage is deserving.
$0.00 is a worse wage. And because of the minimum wage, millions of Americans are making it every day.
If people were making $0 they would starve to death instead people, of course, get welfare payments.
AS,
Allowing wages to fall, like allowing the price of appliances to fall, hurts the poor people you seem to think you can about more than anyone else. Keeping wages artificially high prevents poor people from getting jobs. An increase in the minimum wage is equivalent to trying to make people taller by insisting that the first ladder rung be further from the ground that it currently is.
Regards,
Ken
So prices and wages fall in kind thus locking the poor people from getting anywhere?
Gil,
No.
Regards,
Ken
“prices and wages fall in kind”
You might expect both to fall, but it is a mistake to presume they fall in kind. In kind assumes price decreases would be entirely due to wage decreases. But of course the “capital” in “capitalism” refers to the explosive growth the capitalist world has seen in *productivity*. The amount of desirable stuff relative to the number of people has grown, accounting for the undeniable growth in wealth. Were it not for an insatiable central bank consuming large amounts of that new wealth, the amount of stuff relative to the amount of money would also have grown, accounting for lower prices and wages as a consequence of increased wealth.
Wealth is more common because increased abundance makes stuff more available. That is what matters. Generalized price (wage) changes, are just an artifact of.the relative availability of the money that those prices are denominated in, and shouldn’t be confused with how easily people can satisfy their wants.
I agree – time to raise it to $250.00/hour – 8 weeks paid vacation, “benefits” totalling $100/hour, a pension equal to 200% of salary after 15 years of work for life …
Many do have jobs – and far more may have lost jobs if prices were fixed artificially and so discourage producers/innovators from making things better –
In Cuba, they had 100% unemployment and 100% misery – nothing to buy with whatever they had – except the elites ofcourse – Even Cuba is discovering that they cannot maintain 100% unemployment
I will not mention that great paradise called the USSR
How can there be “100% unemployment”?
You probably don’t keep up with such statistics but what would you guess is the percentage of letters you’ve written that have been published?
“The seemingly endless variety of products in our stores is controlled by an ever smaller number of immense trading companies that, increasingly, charge us higher prices” – Barry Lynn
Is “Barry Lynn” a penname of Sam Drucker down in Hooterville?
Entrepreneurs don’t need any help from government, they just need to be left alone. “Progressive” policies like required minimum wage, workmen’s compensation, unemployment insurance, mandatory liability insurance and a labyrinth of other regulations and licenses that large companies can more easily meet than smaller firms guarantee that the big guys will come out on top.
I do have concerns about les competition. In Detroit metro area, grocery stores have condensed into three chains. And they have since become fewer and further apart. Prices are much the same in Detroit area as they are in Phoenix metro with more than 7grocers to choose from. But, the availability of convenience in proximity is greater.
My concern is that another grocer loses in the competition and falls out…. How does condensing of an industry help consumers. I think that govt benefits, as it has greater control over two in an industry than govt would of many.
It’s important to remember that businesses don’t necessarily have to compete against other extant businesses, they have to compete against the businesses which the supply curve predicts would exist if prices increased.
A monopoly of efficiency, that is to say, a business that has sole control over the market because no one else can compete against its prices, cannot maintain its monopoly status if it tries to abuse its monopoly status to drive up prices, since it only enjoyed monopoly status because of its low prices. It can’t simultaneously charge less and more than its competitors would for the same goods.
“A monopoly of efficiency, that is to say, a business that has sole control over the market because no one else can compete against its prices, cannot maintain its monopoly status if it tries to abuse its monopoly status to drive up prices, since it only enjoyed monopoly status because of its low prices. It can’t simultaneously charge less and more than its competitors would for the same goods.”
I think you’re forgetting the socialist stupidity fantasy aggregate, that shows clearly that it can. Whassamatter for you?
“How does condensing of an industry help consumers?”
That’s an interesting question. At first glance it may seem that consolidations can never benefit consumers. But I’m not sure that’s always the case.
Consider the Southwest Airlines acquisition of AirTran. This consolidation may reduce competition in some markets. But that’s probably not true in AirTran’s largest city, Atlanta. Adding Southwest’s financial strength will no doubt enable a low fare challenge to Delta. So a market which was dominated by the world’s largest airline is about to see, through consolidation, a major war which can only benefit the consumer.
Clearly, the ‘big’ chains have disposed of most ‘mom and pop’ grocers. But, the ‘mom and pop’ likely had to have higher prices to offset their overhead and income needed from sales, as their total sales were likely to be less, compared to the ‘big’ chain stores.
So, the ‘big chains’ brought lowered prices, and lowered profit margins, but higher sales and higher total profits. Consumer makes gains by having spent less on same products.
But, the ‘big chains’, in Detroit area, have gone with less stores (less costs of operations) but have downgraded the amount of competition with fewer overall chains. Not the chains fault that others have not entered the market or have left, but assuming that this is a unique scenario and the market further consolidates………
While prices are lowered…….. the costs on the shopper increase by loss of time and costs associated with transportation, due to less available stores.
AAAnnnnn, this should assume opportunity opens up…. But, it hasn’t yet……. suppresssed economic conditions with expected losses yet to come? Been the case for a couple of decades now. So, could it be said that either the consumers have not yet clamored for filling of grocery stores in between the long distances of their home and current locales? Or just a unique scenario, whereas, the opportunity is unlikely to be realized since the economic situation has continually been deteriorating and there is little expectation of the pendulum swinging anytime, soon.
I am in the Detroit area, and I am not sure what 3 chains you are talking about. I do much of my grocery shopping at Costco or Sam’s Club. Other stores I sometimes shop at, or could, include Meijer, Wal-mart, Kroger, Whole Foods, Aldi, K-mart, Spartan, and Trader Joe’s. A friend of mine manages his family’s grocery store in Redford. I sometimes stop at a Breadsmith store to pick up a fresh baked loaf of bread.
I think it is inevitable that stores specialize and find niches. I see a ton of groceries moving through Costco and Sam’s Club. Others must differentiate to survive. In contrast to your view, I see a wide variety of choices.
I spent most of my time in southern Detroit area…. Walmart, Meijer, and kroger be it. Costco is Livonia……a 40 minute drive or down to Toledo….. Not convenient at all.
SAMs club….. Closed down…. Walmart is 20miles or more away….. Lincoln park, Wyandotte, Allen park… A.k.a downriver…… No trader joes……… Spartan???? aldi???? Kroger is about 10 Or more….. This is not outskirts of town….. Mevlindale, river rouge, river dale, gibraltar, southgate…….
In Phoenix, there are over 8 grocers to choose from in 5 miles in any direction.
And, you may be right, some K-marts do have a grocery aisle. And, I know of one, was a kroger, before it was a Meijer, after it was built for walmart…… Not much hope in it’s longevity.
Lived whole life south of Outer Drive…. Worked in Livonia…….and in Detroit??? Not pretty…… That is a very large area… Not just the ‘blighted area that all cities have’.
Walmart… Woodhaven.
Americans complaining about high prices. Guffaw. Barry Lynn doesn’t know how lucky he is. Should he spend about 10 minutes in your average retail outlet in, say, Australia or New Zealand, he would know what high prices are.
Why shouldn’t we? If the complaints and lack of spending can drive down prices further, while still maintaing some of the quality, then more power to us.
Lack of spending is most likely the reason there aren’t more stores in the area.
When you shop, do you have trouble finding a parking space? Are checkout lines long, even though many registers are open?
If not, there isn’t likely enough business for more stores to operate in your area, therefore there aren’t as many as you would like..
A prime example of the Bootleggers and Baptists paradigm:
“President Obama is proposing various initiatives to strengthen small businesses, including a $30 billion fund for community banks that agree to lend to local entrepreneurs, in an effort to spur job creation and help the still-fragile economy.”
In other words, banks will be handed guaranteed money if they just find some suckers, aka entrepreneurs, whom no one else will loan to. Of course there are often good reasons when no one wants to loan you money. The likelihood of failure is high on the list. With Obama’s help, these entrepreneurs can fail more spectacularly, and the banks make out like banks usually do these days. I am sure there will be some success stories and Obama will invite the two of them to his next State of the Union address and ask them to stand and take a bow.
Additionally, it is ironic how Leftists are always whining about (usually imagined) private monopolies; but they seem to love government monopolies, which are far more powerful, control a far greater percentage of their markets (often 100%), and have a far greater effect on the price/availability of that given service or good.
Take, for example, the Post Office, which has a literal monopoly on first class mail delivery. Or education, in which they fight tooth and nail against any sort of reform that would provide competition to public schools, such as charter schools or tax credits for private school tuition.
Or healthcare, where many of them advocate a government single-payer system; and others advocate at least for “public option” to “compete” with private insurance companies — though, of course, they advocate no “private option” to compete with true gov’t monopolies in some of these markets, such as the aforementioned first-class mail delivery and education.
Additionally, Leftists vehemently oppose any proposal (such as Rep. Paul Ryan’s) for Medicare to provide money for seniors to purchase insurance on the private market, rather than as a direct-payer system.
If private monopolies indeed lead to a more expensive product of poorer quality, why should a government monopoly be any different?
In fact, a government monopoly is FAR worse than a private monopoly, for a private monopoly is generally achieved by the company providing a product so good that customers flock to them. This is VOLUNTARY. Gov’t monopolies, such as in mail, education, and a single-payer healthcare system, are achieved through brute force.
President Obama even sort of admitted this, when he noted how the Post Office is far less efficient than Federal Express. Then why don’t we move to a system of more Federal Express and less Post Office???
Any system that uses brute force to stifle competition is a system that is obviously inefficient, and morally repugnant. And by the way, government is indeed brute force, even if it requires a majority. 51% of people imposing their will on the other 49% is no less immoral than 49% of people imposing their will on the other 51%.
More development make the rich persons more rich as they also have monopoly in various products . More over govt should have some law enforcement on them that will avoid them to do the things that are not in the favor of common men.
there is nothing the rich can do that is “not in the favor of common men.” Not is class warfare. the rich don’t harm the poor. Each person is free to make the best for himself
Nanopower: “More over govt should have some law enforcement on them that will avoid them to do the things that are not in the favor of common men.”
They do: It’s called the Constitution, but it’s mostly ignored these days.
OK, I’ve always been the slow kid in class, but when I looked through Table 3, I didn’t see any comparison between prices today and prices 25 years ago. I don’t see any of the percentages that Don reports. What am I missing?
The blogs presented are about a very complex economics government system. It is very difficult to express a meaniful characteristic because there are so many interactions that a simple statement can not be true