A reply to Freddy

I have readers! I honestly didn't think I did, beyond a few people I know in real life. Anyway, regarding my piece on market failure, blogger Freddy replies (all direct quotes from Freddy will now be in italics):

Freddy here, just wanted you to know that I have read your post and it has not changed my views on the free market system at all. Of course I do not expect my post to change your views, but since you did throw down the gauntlet, I had to reply. You and your readers can find my reply to your post here.
Also after this I do not see much need for us to continue on, because as I said we will not change either personal views, and we know it.

Whoa, now Freddy, how come you won't possibly change my mind? Just because you want to be close minded doesn't mean I have to, projection bias dude. Let's take a look at the reply

[W]ho this cornucrapia person is or what their credentials are, because they do not list their name or any personal information on their blog that I could find.

I'd be more than happy to fill in a few blanks for you Fred (may I call you Fred?) My qualifications are nill, you'll just have to take my arguments at face value, as you should do with any argument really. In terms of education, since you mentioned your one econ class, I've had two so far, although I'm an economics major and in a few months that number will increase significantly. As for who I am, I'm a young male Canadian currently living and going to school in Calgary, the rest is not really something I feel like shouting from the internet, for whatever reason.

Now that introductions are out of the way, let's move on to the counter-arguments, and my own responses:

But taking your example of the electrical grid, you are right it does not make much sense to run 4 or 5 wires to the house. But it does make sense for me to be able to purchase my electricity from 4 or 5 companies delivered over the same wires. That way I can select green, nuclear, or traditional sources if I want. The way I see it the only regulation that is needed, is that the company in charge of the wires would have to charge everybody the same rate, and be a not-for-profit company.

That's shifting the debate Fred, I was talking about the electrical grid. You've completely agreed with my point, the electrical grid cannot run according to market principles. Now imagine if a company owned the grid, and that company also had heavy investment in, say coal fired power plants. How much of a chance do you think competitive alternative providers would have of penetrating that market?

Regarding Microsoft, the argument is too long to repost here, please refer to the original blog for Freddy's view on why MS is a good monopoly.
Here's my problem with the thrust of Freddy's argument, as I understand it. Companies like Netscape and Lotus and Apple came along with superior products, sporting fancy new innovations, that threated Microsoft's total dominance of some aspect of the market, browsers or word processors or whatever. This forced Microsoft to incorporate those innovations to maintain their dominance. The idea is that Microsoft is still subject to competitive forces, even in a monopoly situation and therefore the consumer still benefits, no problem right? Well, what about all the companies that took on Microsoft and failed? Were these envelope pushing innovators rewarded as they so obviously should be under a market system? No, they were crushed under the weight of the reigning juggernaut. This is hardly an endorsement of monopoly as I understand the characterization.

Besides the Microsoft model, there is another way to attain monopoly:

That way is for a company to “buy” that position in the market place, by funding the campaigns of the elected officials in government. This gets them access, which they use to limit and harm their competition. They get favorable tax laws, such as an exception for a company that was incorporated on a certain day, in a certain state and produces a certain product. The get regulators to look the other way at the urging of those elected officials, that fund their departments. Finally they work with those officials to get laws passed that are suppose to regulate them, but instead really hurt their competitors more.

Well, I'm opposed to lobbying, and everything that's described here, and I agree that it happens and should be stopped. I should mention a slight variation on this theme. What can also happen is that a few major players in any sector, say for example, the handful of big media companies in the States, or looked at from another direction, maybe a chain of industries, like an group of companies that collectively extract, refine, transport and sell to end consumers oil and gas can collude to exploit the consumer, without even necessarily requiring the government at all (although it sure helps). For an idea of what this would look like, read up on Standard Oil

I'm trying to put together exactly what role Freddy wants for the government in all this:

The true source of large, sustainable monopolies is not free markets, but cooperation between government and business to the benefit, at least initially of both. Any market that allows government regulation, is by its nature not a free market. You can not have a free market when the regulations placed upon you limit the choices and products that a business can make. I will admit that there is most likely a level where government regulations help the free market, but just like anything there is a point where it turns dangerous. Even water if you consume too much of it will kill you. To take this analogy further, government regulations are like someone sticking a hose in your mouth and forcing you to drink. If the more water you drink, gives them more of what they want, they will always kill you before they are satisfied. My solution to the problem is to keep the hose out of my mouth.

Wait, what? Everything is subject to some government regulation, otherwise there'd be way more corporate hit men, among other serious issues. All markets are at least subject to the basic regulations, like no stealing, killing etc. Further, you've characterized at least one situation (the electrical grid) where government (I assume that's what you mean by a not for profit company that was required to charge everyone the same rate, I'd be fascinated to know how else that could come about) regulation would be necessary for competition among power plants. Now sure, if you bring government into everything, your metaphorical hose-drowning moment, we'd have problems, I couldn't agree more. All I'm taking from this is government is good when you have just enough of it, but too much or too little is bad. Well, yeah.

So I can choose not to purchase steel from plants that pollute or purchase items made using the steel from those plants. The next question is how will I know that, simple someone will most likely sell me, or if they are generous provide me, with that information for free. If enough people make those choices then the steel plants that pollute will either change their ways, or have to close.

I don't entirely disagree with this premise, I do think that to some extent, corporations respond to consumer pressure, I just think that it's often far easier for them to deceive people than actually improve. The only way you're going to get a company to disclose information that will hurt their bottom line (like the fact that the reason their steel is so cheap is that it comes from China, where there is no law against dumping all the by-products in the river) is to force them. If this someone in your example goes to a steel mill and says "Hi there, I'd like to come inside and see what you're up to" they are going to be told to fornicate themselves, unless there is a law saying the company has to let them in. If the government itself for whatever reason doesn't have inspectors of some sort to assess the quality of both the means of production and final output of a company, then some other quality enforcing entity must. There are items that are simple enough for the public to provide this mechanism, however, there are a much larger number of products that need professional attention. For example, presumably you don't have a problem with the FDA inspecting all the food you make to ensure food producers are following safe and healthy production methods. That's a form of government regulation, do we now have to add food production to the number of items that are not suitable for free markets? What exactly are we going to have left under this definition?

It goes on and on but I'm getting tired frankly. I think I can summarize the differences of our opinions with a sports analogy. Picture a game of football. Sports are competitive right? Nothing but pure competition here. How do we know? Well there are referees on the field, making sure the rules are enforced, it's a good clean game. But wait! One team seems to win all the time. It is discovered that it's because that team was all on steroids! Now is it competitive? What if one team has a much larger budget than all the others and can therefore afford to hire away all the better players? What if a couple teams are fixing their games to make money off gamblers? The list of ways there could be corruption go on and on. What you need is an external source of order. Getting back to the real word, that enforcing role is the government. Now there are a number of ways this can run into trouble. Freddy's examples mostly center around the government making it's own team, and giving them special treatment, or co-opting an existing team and doing the same thing. My examples refer more to the sort of within the rules game fixing I spoke of, steroids, throwing the game, etc. What we both want to see is a level playing field where what actually matters to people, be it a good clean sports competition or a responsibly produced, environmentally friendly, affordable bar of soap is most likely to be produced. The way I see things the more present and powerful danger to us and our likelihood of achieving these goals comes from corporations, but don't take that to mean I have much love for our government either. The fact is though, government has a larger built in mechanism for public accountability than corporations do, and what I really want to do, is put the power in the hands of people.

Two final notes. Please don't take my flippant manner of writing as an attempt to belittle, it's just how I write. I don't want to cause offense just because you're not familiar with my style. Second, while I'm not a communist, I do feel compelled to reply briefly to this statement:

That leads us into the third point I want to make. If what you truly believed work so well, why was the former Soviet Union not a paradise. The economy was completely regulated, there should of been no corruption or pollution, and everybody should of had all that they wanted or needed. But that was not the case, was it. Conditions in the Soviet Union were bad and still are bad. Pollution was worst there, then in the west, and corruption was the norm in the government.

As I said, I'm not a communist, but here are a couple posts from a communist that I highly respect that address your point:

Theory and practice
Communism and bad shit

I know you said you weren't interested in carrying on the conversation, and of course that's entirely your right, but I will say that I'd be happy to continue discussing things if you want to.