Tuesday, September 9, 2008

monopoly, the state and you

monopoly is a bad word. it conjures up images of all sorts of private-entity ghouls and goblins. what is little known, is that there are actually two types of monopoly: coercive and voluntary. though the voluntary monopoly is very rare and the one most demonized, undeservedly, the coercive monopoly is quite common, even ubiquitous, rarely mentioned and quite destructive.

on the free market (which does not exist in any measurable capacity in the united states), the business, or voluntary, monopoly is the rarest of occurrences. in a free market, competition is virtually unlimited, with entry to a market merely an exercise in capital funding. this forces businesses to lower price and refine products to a very high level. for a voluntary monopoly to arise in this type of environment, a company must be extremely, almost impossibly, efficient and consistent in resource allocation. personally, i am not aware of the existence of a true monopoly in history. so in order for such a company to gain monopoly status, it must be the absolute best at serving consumers with a low-priced, high quality product. now what is so scary about that? remember that this company exists in the free market, so it can never use force or fraud against its customers, because entrepreneurs lurking in the shadows will quickly appear on the scene to snap up unsatisfied customers. not to mention the efficient and fair justice that would be available to victims in such a market and a news media with no government to report on, doing their best to dig up reputation-ruining news on such a company.

contrast this with the second type of monopoly - the coercive monopoly. it is possible that the benign, even beneficial voluntary monopoly has never truly existed. the coercive monopoly, on the other hand exists in virtually every corner of human society, tearing away at civilization with every passing day. the best example of such a monopoly is government, or "the state".

the state is a legal monopoly on the use of force, meaning that it is the only entity that has the legal right to use force against others. it uses this ability to force its way into markets and monopolize certain market segments such as national defense, justice, domestic security and to grant certain other monopolies to politically connected companies, such as telephone, power and cable providers. there are a few major problems with such a situation:

1) the obvious violation of rights. because all people have the absolute right to their own property, government infringes those rights by disallowing competition in certain industries and forcing customers to use monopolized services they may or may not want.

2) monopoly is a very unstable condition. because of the lack of access to market prices, they can not determine proper resource allocation or production values. therefore, production is arbitrary and haphazard. there is no way to tell how much to spend on defense or justice, because there is no pricing input to determine demand. for a brief audio introduction to the economics of this phenomenon, see here.

3) a monopoly has little incentive to innovate, improve products or improve production efficiency. because they are the only game in town, a monopoly, coercive or voluntary, has little need to do things any better than they already do. in fact, the tendency is for quality to erode and prices to increase in the face of a lack of competition. this is something that threatens the voluntary monopoly - they must continue to provide the highest quality at the lowest prices possible because of the threat of new, hungry competitors coming out of the woodwork to poach customers. the coercive monopoly, on the other hand, uses force to keep competition out, insulating itself from such a threat. therefore it has absolutely no reason to try to please its customers, since it has no competition to fear and the ability to force compliance from its customers.

these factors combine to form the reason the state is so expensive, inefficient, incompetent and arbitrary. if the state were to go "legitimate" tomorrow, and make all of its services voluntary, how long would it be able to stay in business? would people actually be willing to pay the untold billions of dollars necessary to keep this leviathan alive? of course not. competition would spring up to eat the state alive within months. many unnecessary "services" would simply fall by the wayside for lack of demand, simply because the state has no way to determine whether the services provided are of any value to the customer.

if these ideas were better understood by the common man, the calls for government control of services would fall away. people would understand that the state is an impossible solution to society's problems. it is a shame that such important functions of civilization are left to the state such as justice, defense and security. the state is completely, from the outset, unable to provide such services in any rational way, while opening a door to corruption and abuse that can never be closed without the state's abolition.

so before you give in to the impulse of asking the state to do anything other than disappear, keep in mind that the outcome will be the costliest, most inefficient, poorly managed and greatly abused of all possible solutions. but maybe that's the burden we have to bear in order to have our rights violated, eh?

No comments: