Friday, 7 August 2015

Been having huge fun on...

...here

Anyone want to help out?

17 comments:

Mark Wadsworth said...

Well I disagree with one of your comments.

Of course there is such a thing as a 'natural monopoly', land ownership for one, and as the commenter said, situations where the minimum efficient scale is big enough relative to the total market.

Also, if you only have a few suppliers you get oligopoly-cartel type behaviour which is much the same as a monopoly.

And the big six energy suppliers clearly are some sort of cartel.

Whether the government should do anything about all this is quite a separate topic.

The Stigler said...

Mark,

"Also, if you only have a few suppliers you get oligopoly-cartel type behaviour which is much the same as a monopoly.

And the big six energy suppliers clearly are some sort of cartel."

I don't think so. I think it's just that in reality, innovation in electricity supply ended some decades ago and so everyone ends up with roughly the same prices. Even if one works a bit more efficiently than another, it's pennies on a bill.

And it was never real competition. It's not like SWEB put a new cable into your home, Eastern still run that bit and some cross-charging occurs (yours truly worked on some of the software that instructed the local board to read the meter). It's also why privatisation will at best make sod all difference. Couple of percent off a bill, if you're lucky.

And railways? Most of the spending and the important bits of running it are state-owned. Stations, tracks, signalling. All part of National Rail, owned and run by the state. This "huge spending on train companies" is bollocks. Most of the money has gone on station, track and safety improvements. There's a relatively small subsidy per annum to the train companies.

Random said...

TS, train companies use those ergo subsidy.

Mark Wadsworth said...

TS, I am not arguing the merits of nationalising vs the state running things. That doesn't have anything to do with something being a monopoly or not.

Fact is, energy supply is ultimately some sort of cartel or monopoly, if you trace it all the way back from your cooker or socket via the cables to the power station and on to the oil or coal field or uranium mine. You will find one rentier after a monopolist after a rentier.

And who said anything about railways? That is also inherently a monopoly, fact is the states owns part of the monopoly and then franchises have local monopolies. Who owns each bit is irrelevant.

So I suppose there are three kinds of monopolies

1. Ones that arise inherently (anything to do with land)
2. Ones where the MES is larger than half the market.
3. Government owned or created ones.

Lola said...

MW - Indeed. I was winding them up.

Lola said...

MW Just to expand. Land is not a 'natural monopoly'. It is a real monopoly. The only original monopoly.
Most of the other 'monopolies' usually arise from barriers to entry erected by the incumbents appealing to government to stop competition.
Overall, the less cronyism the less monopoly opportunity.

Mark Wadsworth said...

L, yes, there are also entirely artificial monopolies created by the government.

With other 'monopolies' and 'cartels', we don't need to be too picky and fussy about it., it is not an exact classification but you know it when you see it.

Bayard said...

I'd just like to be entirely predictable and disagree that railway companies are only monopolies for a very restricted meaning of the word monopoly. (In the sense that Rolls Royce are a monopoly because no-one else makes Rolls Royces.)

Mark Wadsworth said...

B, they are local monopolies in the purest sense.

If demand goes up ten per cent they can jack their prices by ten per cent without fear of other railway companies undercutting them and with no increase in input costs.

For sure, they compete with road traffic (or simply travelling less) but that applies to all monopolies apart from fresh air (for which there is no substitute).

The Stigler said...

Random,

No, the subsidy on rail is a subsidy to passengers (who should pay full fares or for safety/track improvements) and ultimately to land owners as a house prices go up as commuting times fall.

Mark,
Yes. Good points.

I used to be really opposed to all the various privatisations, but they seem to mostly work, and mostly because they've been regulated, and generally rather well. So, the government will tell BT how they will behave (e.g. maximum price they can set for exchange-to-home access) but they don't get involved in how BT run things.

Electorally, it's a non-issue. It's like my principled opposition to the monarchy - it about number 99 in my list of things I'd like government to fix, and a long way down from things like sorting out bad hospitals and schools.

Bayard said...

"For sure, they compete with road traffic (or simply travelling less) but that applies to all monopolies apart from fresh air"

Not at all. If your house is connected to a pipe supplied by Welsh Water, you cannot buy your water from anyone but Welsh Water. That is a monopoly in what is being offered, i.e. water. What the rail companies are offering is travel from point A to point B. You don't have to use rail to do that.

If demand goes up ten per cent Rolls-Royce can jack their prices by ten per cent without fear of other car companies undercutting them and with no increase in input costs. because no other car companies produce Rolls-Royces.

Random said...

"Rolls-Royce can jack their prices by ten per cent without fear of other car companies undercutting them and with no increase in input costs. because no other car companies produce Rolls-Royces."
Yet... Dun dun dun
Also what about second hand cars.

Lola said...

B. Re Water. If you separate the pipe ownership from the water supplier then you can buy, say, Scots water instead of Welsh water. I came across some historical research (from the US, naturally) that showed that competing utility suppliers worked fine.

TS. Yes the Monarchy is an anachronism. Four words: President Thatcher President Blair. Much better to have the anachronistic Royal Family as Head of State than some elected chancer. Anyway it's probably cost neutral considering all the foreigners who pay to come here and look at it. It's like St Paul's Cathedral. Great to look at but essentially pointless to most of the population but it's better to keep it than knock it down.

Lola said...

MW. 'You know it when you see it' - like banking then? The classic crony monopoly.

Mark Wadsworth said...

B, re Rolls Royce, piffle, these super luxury car makers are not particularly profitable. If they could just jack their prices then their cars would cost infinity by now and there would never be a new start up.

Jost because something is a monopoly does not mean that there are no alternative products. If I don't like buying Welsh Water I could buy bottled, use rainwater or move somewhere else.

L, you seem to assume that in the absence of the royal family we would need some head of state above and beyond the Prime Minister. Fact is, we don't.

Bayard said...

Mark, exactly, neither Rolls Royce nor the rail companies can jack their prices up because the customers would go elsewhere (other cars in the case of RR, bus, car or bicycle in the case of the railway companies).

"I could buy bottled, use rainwater or move somewhere else."

That would be cutting off your nose to spite your face, bottled water being so much more expensive than the water from the tap not to mention the costs of moving house.

Mark Wadsworth said...

B, you seriously missing the point and stating the bleeding obvious.

The point is that one way to recognise a monopoly is that "if demand goes up then so does the price without any increase in quantity or quality".

Is it fair to say that if demand for travel generally goes up - by whatever means - that railway ticket prices and petrol prices go up, without any increase in quantity or quality?

Yes, it is true. Therefore railways are a monopoly and petrol is a monopoly.

But the price of cars would not go up, the quantity sold would go up. So car manufacturers are not a monopoly (except in East European state owned system).