The Disadvantages of Being a Government Monopolist

I don’t mean being the dominant player in a market. I mean here a much tighter definition of monopoly: legal monopoly.

Governments suck.

The reason they suck is because they are monopolists. The good news is, this means opportunity to outcompete governments for all the stuff they do badly. (At least the parts that anyone actually wants done).

The challenge of competing with governments is of course that they can kill anyone who doesn’t want to be a paying customer. This gives them a huge customer base.

It turns out, people don’t like to be killed. So they pay government to avoid it. They take the services since they had to pay for them anyway to avoid being caged (or killed if they resisted being caged).

But this provides the opening for competitors.

It also turns out, you don’t get good information about how to make your product valuable when everyone is buying it out of fear you will kill them if they don’t. So governments plod along delivering unimaginably stupid services in unimaginably backward ways with terribly high costs and the worst employees in history.

It’s so bad, in fact, and so hopelessly, systematically deaf to information on how to improve, that people clamor to pay even more money to service providers who can do better, even though they are forced to pay government for their services already.

A customer willing to double pay for your service is a great customer!

Companies that deliver services to compete with government get quick feedback from the market on how to do it well. If they don’t act on it, they don’t survive. It’s very tough out there when your customers don’t have the looming fear that you might kill them. But that’s also what makes real value creation possible.

I am bullish on competing governance services. I love them.

Yes, governments can come threaten to kill such service providers if they don’t stop. But luckily governments move slow, are always trying to figure out the laziest way to maintain power, and often lack the foresight to realize a competitive threat before it’s too late.

The real bear case against competing upstarts is that they will succeed, get tired of competing, and morph into one of the many fat sloppy formerly-private rent-seeking appendages of the government. Yuck.

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Europe is Better For Some

The question was: In what ways is living in Europe better than living in America?

I’m not delusional. I am sure there are things about living in Europe that are better– or that I would consider better– than living in America. But my subjective list wouldn’t be the same as that guy’s subjective list. Because much of his list is based on statist lies.

  • you get six weeks paid holidays;

(The cost of which is going to come from somewhere, and it’s not out of the employer’s pocket. That’s just the economic reality. Yes, it is “paid”, and you are paying for it one way or another. Sorry to burst your bubble.)

  • you get universal healthcare;

(TANSTAAFL. He means “health care” paid for through theft, and rationed as bureaucrats see fit.)

  • you get a proper pension plan;

(“Proper” in whose eyes? Paid for by whom? Where is the trade-off… or does he deny there is one? Yes, a nice pension would be… nice. And maybe if the U.S. government in America hadn’t imposed “Social Security” they might be more widely available here.)

  • you can live in romantic, old cities that are 2.000 [sic] years old, in houses that are 500 years old, with modern conveniences;

(That sounds nice. Living far from any city sounds even better.)

  • weekend trips offer abundant, historical and romantic destinations at an amazing density; you could live somewhere for ten years and go somewhere new and interesting every weekend under an hour away;

(That has some appeal.)

  • no guns;

(He means a government monopoly on gun possession– a police state; not “no guns”.)

  • free schools;

(Theft-funded schools instead of education. Just like in America.)

  • free universities;

(Theft-funded universities.)

  • life and attitudes generally seem more gentle;

(Sheep usually do seem that way. As do the wolves– good and bad– who want to blend in with the sheep until they strike. Don’t confuse outward demeanor for a lack of inner fire.)

  • the variety is amazing – drive an hour, and you can be in a place with a different language, architecture, cuisine, and culture entirely.

(I’m guessing he didn’t travel around America very much before he moved to Europe.)

I guess if you want socialism and a police state where only the government is properly armed, Europe (excepting some of the more enlightened places) might be “better” for you. The whole world seems to be going down the socialism sewage pipe. If that’s your thing, go for it.

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Nation, Country, and State

These words are commonly conflated and treated as synonyms. Do you know the difference between them?

Nation: a group of people with common ancestry and language

Country: a geographic region or native land

State: political organization or government

Nations are people. They are an organic extension of family relationships.

Countries are places. They exist whether people live in them or not.

States are artificial entities. They are used to claim and exercise control over nations and countries.

It is natural and understandable to strongly identify with a nation. These are the people who sacrifice to bring you into the world. They show you what it means to love and communicate and share and belong. They provide you with opportunities and resources. They constitute a division of labor within which you can serve and be served. Everyone should celebrate and honor what makes their nation special.

The earth is a beautiful place, and it is natural and understandable to develop a special appreciation and fondness for the country you grow up in. This is the corner of the planet where your nation learned to grow food to survive. It is where you learn to walk and explore. It is where you work and play with friends and loved ones. It is where you sleep at night and where you invest the fruits of your labor and plan for dreams of your family’s future.

States are not nations. States are not countries. States are control systems. The word government means “mind control” (from the Latin gubernare for “command” or “control” and mentalis for “of the mind”). These are the systems whose agents rule over you. They claim the right to take and redistribute your property as they see fit. They claim to be the sole legitimate source of ultimate decision making with a monopoly on violence in countries and over nations. They deserve neither your allegiance nor your praise.

When people wave state flags or sing state songs, it’s easy to cringe at the thought that oppressive monopolies are being celebrated. While this is sometimes sadly accurate, I think it’s important to understand that most people who do so are really thinking of the people and land and way of life that they cherish.

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Commercial Ammo: The Untold History of Springfield Armory and America’s Munitions Factories

To understand how American citizens today can get their hands on ammo, which rolls off the same factory lines as those that supply the world’s largest militaries, it’s important to first understand how munitions technology developed. Starting in medieval Europe, on a battlefield where a mounted knight in armor could defeat almost any number of peasants, the development of more advanced and accurate ways to destroy enemy personnel and equipment by launching a projectile is one which combines trial and error, scientific ingenuity, and private enterprise. It’s a story of power and technology dating back to the 13th century, at the height of “the divine right of kings,” and tracks the subsequent diffusion of that power held by a chosen few as the individual became capable of breaking the state’s monopoly on violence.

The first recorded use of gunpowder appeared in Europe in 1247, although China had used gunpowder for centuries before that, mostly for fireworks. The cannon appeared nearly 100 years later in 1327, with a hand-sized version making its debut in 1364. The first ordnances were made of stone, and while it might have been theoretically possible for anyone to own one, this would have been outside the financial reach of anyone but the nobility.

Stone was quickly discarded as a source of materiel for one simple reason: It wasn’t effective against stone fortifications. Thus did the first ever arms race begin, as medieval armies sought ways to fire heavier and heavier projectiles. The first recorded example of a metal ball being fired from a hand cannon came in 1425, with the invention of the hand culverin and matchlock arquebus, which led to lead balls becoming the gold standard for projectiles. This is where we get the term “bullet” – boulette is French for “little ball.”

Ammunition remained largely the same for centuries: Little balls of metal virtually anyone could make. This was true until the invention of rifling in the mid-19th century. Even this invention was, at first, not terribly useful for military purposes. Not only did the barrels quickly become useless, but the barrels often could not be fitted with a bayonet. This made early rifles impractical for military use and mostly a bit of a toy. Not until the advent of progressive rifling (which came, depending on one’s point of view, fortuitously or not, in the middle of the U.S. Civil War), did rifles become practical for military, and also widespread civilian purposes.

Copper jacketed bullets arrived in 1882, but since then the development of both military and commercial ammo has largely been about degrees rather than revolutionary innovations like rifling. The same basic design for cartridges has been in place since the late 19th Century.

Advancing technology was likely a driver in the move toward ammunition produced for commercial purposes, rather than simply military use. While in the past, it was common to simply make lead balls in front of the fire as a family after dinner, making a modern rifle cartridge is far beyond the means of most people. Further, it requires safety procedures above and beyond simply molding lead balls.

Continue reading Commercial Ammo: The Untold History of Springfield Armory and America’s Munitions Factories at Ammo.com.

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Facebook Isn’t a “Monopoly” — Let’s Not Make it Into One

Facebook co-founder Chris Hughes, adding his voice to calls to “break up” the social media giant,  calls it a “powerful monopoly, eclipsing all of its rivals and erasing competition.” In recent years, we’ve seen similar claims, and heard demands for similar remedies, aimed at Google, Amazon, and other large companies.

Are these claims true? Are the large “dot-coms” monopolies in any real sense? The short answer is no. Using the “m-word” is a way of avoiding the necessity of making a sound argument for a desired policy outcome.

Whether that avoidance strategy is due to laziness, or to not having a sound argument to make, or some other reason, falls outside the scope of a short op-ed column. But the first step in forcing better arguments is quashing bad ones, so let’s look at what “monopoly” actually means.

According to Oxford Living Dictionaries “monopoly,” as the term is used by the Facebook-breaker-uppers, is “[a] company or group having exclusive control over a commodity or service.”

What commodity or service is Facebook a “monopoly” in?

Certainly not social media. You’ve probably heard of Twitter. You may have also heard of Diaspora, Minds, MeWe, Mastodon, Gab, and a number of other companies, sites, and apps offering the ability to post updates to friends and followers and discuss those updates.

Advertising? Not even close. Does the name Google ring any bells? How about Microsoft? There are plenty of smaller web advertising networks you probably haven’t heard of as well.

Then there’s messaging and chat. Yes, Facebook owns Messenger and WhatsApp. But it doesn’t own Discord or Slack or Signal or Skype or Telegram or any of hundreds of other messaging/chat apps.

Facebook has lots of users. Facebook makes lots of money. But Facebook isn’t a “monopoly” in any of the services it offers. It has loads of competitors, many of them doing quite well, and its users and customers have the option of using those competitors instead of, or in addition to, Facebook any time they like.

More importantly, Facebook has no ability to prevent new competitors from entering the markets it serves. And therein lies a political paradox.

While so far resisting the “breakup” talk, Facebook and its CEO, Mark Zuckerberg, have recently become increasingly receptive to government regulation.

Why? Because Facebook is big enough and rich enough to cheerfully comply with whatever regulations its detractors can come up with, and to hire armies of lobbyists to “capture” and shape that regulation. It can probably even survive and profit from a supposed “breaking up.”

Your brother-in-law’s basement social media or advertising or messaging start-up, on the other hand, probably isn’t well-financed enough to navigate a substantial federal regulatory regime or to successfully fight for its life if the regulators come down on its head even once.

Facebook isn’t a monopoly.

Facebook isn’t close to becoming a monopoly.

But if the people incorrectly calling it a monopoly get their way, they’ll have taken the first giant step toward making it into one.

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Big Business: Recasting the Anti-Hero

Tyler Cowen’s previous book, Stubborn Attachments, is right in general, but wrong on particulars.  His latest book, in contrast, is largely right on both.  The world needed a new book to be pro-market and pro-business at the same time, and Tyler’s Big Business delivers the package.  I’m almost tempted to quote Keynes:

In my opinion it is a grand book … Morally and philosophically I find myself in agreement with virtually the whole of it: and not only in agreement with it, but in deeply moved agreement.

Highlights include:

1. A popularization of Bloom and van Reenen’s work on the power of management:

We must take a moment to appreciate the particular character of American business. By global standards, its overall performance is remarkably impressive. Stanford economist Nicholas Bloom and a group of co-authors studied and compared management practices in some of the major economies, including the United States. Their survey assessed how well a workplace uses incentives, the quality of performance measures and reviews, whether top management aims at long-term goals, whether top creators are well rewarded, and whether the firm attracts and retains quality employees, among other relevant metrics…

So at the end of all of these measurements of management quality, which country comes out on top? The United States is a clear first…

Management really matters. Let’s say we take two American plants producing comparable wares, but one of those plants is in the 90th percentile in terms of productivity, while the other is in the 10th percentile. The former plant will have a productivity level four times higher than the latter plant, due to superior management practices. It has been estimated that Chinese firms could increase their productivity by 30–50 percent and Indian firms could do so by 40–60 percent merely by improving their management practices up to an American level of quality.

2. Business practices and promotes good manners and civility.  Despite modern political hysteria…

the world of American business has never been more productive, more tolerant, and more cooperative. It is not just a source of GDP and prosperity; it is a ray of normalcy and predictability in its steady focus on producing what can be profitably sold to customers. Successful businesses grow dynamically, but they also try to create oases of stability and tolerance in which they can perfect their production methods and which help to attract and retain talent…

American big business in particular has led the way toward making America more socially inclusive. McDonald’s, General Electric, Procter & Gamble, and many of the major tech companies, among many others, were defining health and other legal benefits for same-sex partners before the Supreme Court legalized gay marriage… This push for tolerance shouldn’t come as any surprise. Big business has lots of customers and relies on the value of brand names. It doesn’t want any group of those customers to feel put out or discriminated against or to have cause for complaint…

3. Some deliberate (?) understatement on fraud:

Most of all, business is criticized for being fraudulent and ripping us off. While there is plenty of fraud in business, the commercial sector isn’t any more fraudulent than individuals in other capacities, and it may even be somewhat less fraudulent.

I’d say there’s no “may even be somewhat less fraudulent” about it!  Who wouldn’t trust Amazon or Uber or Airbnb over a random American who promised to provide the same product?

4. Business thinks long-term, usually:

It can be very difficult to distinguish between short-termism and an inability to see into the future. The failed Netflix competitors were mainly not venal rip-off artists; rather, most of them genuinely did not see that providing massive amounts of streaming content would prove to be a winning strategy. If half of the time businesses think too short-term and the other half of the

time too long-term, there will be thousands of valid examples and anecdotes about excessive short-term thinking and planning, and they aren’t necessarily related to CEO dishonesty.

And:

Of course, markets also think long-term when it comes to successes, and that long-term mentality is encouraged through CEO pay structures. Consider Amazon, which has a stratospherically high share price, even though the quarterly earnings reports usually fail to show a sizable profit. Whether you think that valuation has been justified or not, it is a clear example of how markets can consider the broader, longer-term picture. Circa 2018, Jeff Bezos ended up as the richest man in the world, and he achieved that status by sticking with some long-run goals.

5. Employment may not be fun, but it’s meaningful and prevents misery:

Another way to think about the non-pay-related benefits of having a job is to consider the well-known and indeed sky-high personal costs of unemployment. Not having a job when you want to be working damages happiness and health well beyond what the lost income alone would account for. For instance, the unemployed are more likely to have mental health problems, are more likely to commit suicide, and are significantly less happy. Sometimes there is a causality problem behind any inference—for instance, do people kill themselves because they are unemployed, or are they unemployed because possible suicidal tendencies make them less well suited to do well in a job interview? Still, as best we can tell, unemployment makes a lot of individual lives much, much worse. In the well-known study by economists Andrew E. Clark and Andrew J. Oswald, involuntary unemployment is worse for individual happiness than is marital divorce or separation.

6. Even much-maligned low-skilled jobs have unsung psychological benefits:

In contemporary American society, poorer individuals are more likely to have problems with divorce, spousal abuse, drug addiction in the family, children dropping out of school, and a variety of other fairly common social problems. These problems plague rich and poor alike, but they are more frequent in poorer families and, furthermore, very often wreak greater devastation on poorer families, which have fewer resources to cope with them. The workplace, however, is a partial equalizer here. At least in this sample, the poorer individuals found relatively greater solace in the workplace than did the richer individuals.

7. Employers’ alleged mistreatment of individual workers is often for the greater good of their whole team:

Along these lines, I hear so many criticisms that companies do not give workers enough personal or intellectual freedom. For instance, many critics have noted that companies have the right to fire workers for their Facebook or other social media postings. Surely that sounds like an unjustified infringement on freedom of speech. But on closer inspection, the stance of the companies is often quite defensible. Unfortunately, a lot of workers put racist, sexist, or otherwise discomforting comments and photos on their Facebook pages, on Twitter, or elsewhere. When employers fire them, very often it is to protect the freedom of the other workers—namely, the ability of those other workers to enjoy the workplace environment free of harassment and threats. It’s not always or even usually a question of the employer versus the workers, or the old story of a struggle between worker and boss struggle. Rather, the boss is trying, sometimes in vain, to adjudicate conflicting notions of workplace freedom among the workers. In other words, the firings are in part an employer attempt to take the overall preferences of the workers into account.

8. Big business is often the cure for monopoly rather than the disease:

[Y]ou can think of Amazon and Walmart as two big reasons a lot of collusive and price-fixing schemes don’t work anymore or don’t have a major impact on consumers. Amazon and Walmart are the two biggest retailers in America, and both compete by keeping prices low—permanently, it seems. Their goal is to become dominant platforms for a wide variety of goods and to use low prices to boost their reputation and their focal status as the place to go shopping. By now both companies are old news, and it is increasingly difficult to argue that their strategies are eventual market domination and then someday super-high monopoly prices. Instead, their strategies seem to be perpetually low prices, followed by taking in insanely large amounts of business and using data collection to outcompete their rivals on the basis of cost and quality service.

My main criticism: Tyler is so pro-business that he often forgets (at least rhetorically) to be pro-market.  He spends minimal time calling for moderate deregulation – and even less calling for radical deregulation.  So while he effectively calls attention to everything business does for us, he barely shows readers how much business could do for us if government got out of the way.  Above all, Tyler mentions the following only in passing – or not at all:

1. The evils of housing regulation.  Business is ready, willing, and able to build mega-cities worth of affordable housing in the most desirable places in the country – the moment land-use regulations permit.

2. The evils of immigration restriction.  Perhaps to broaden his audience, Tyler fails to mention the eagerness of business to provide international workers with the opportunity to use their talents for the enrichment of mankind.  If I were him, I would have highlighted (a) how much business has done to increase immigration, and (b) how much business has engaged in righteous civil disobedience by hiring workers despite our unjust immigration laws.

3. The evils of labor market regulation.  Tyler barely mentions the many awful side effects of much-loved labor market regulations.  This was a mighty missed opportunity to lambast the horrors of European labor market regulationBig Business was also a great opportunity to explain why discrimination is usually bad for profitability, making anti-discrimination regulations superfluous at best.  Indeed, Tyler could have used the ubiquitous employment of illegal immigrants to illustrate these truths.

Fortunately, it’s not too late for Tyler to correct his unfortunate omissions on his blog.  Big business has been miscast as an anti-hero, but populist regulation is a Thanos-level supervillain.

P.S. Exercise for the reader: Name a better book cover than Tyler’s!

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