29 July 2009

The Anti Googlopoly

Wired has a great article (via Mankiw) on the likelihood of Google going the way of IBM and Microsoft. Take a look.

As a teaching assistant in BYU's American Heritage course, I taught that although monopolies and cartels are a market weakness, attempts to squelch them are mostly futile, because profits attract fierce competition and technological innovation overcomes barriers to entry, whether natural or manufactured. These also tend to minimize the negative effects of monopolies on consumer well-being--monopolistic industries almost always become more competitive over time.

However, monopoly power is a very real thing, and companies routinely engage in collusive and/or predatory behavior in order to raise prices above the competitive level. We, as libertarian-leaning citizens, should be opposed to policies that provide advantages to one firm or industry over another, but we should be in favor of things that help promote a competitive landscape—we “worship” the market, not the corporation. The difference between those two points, and confusion over the intentions of many a politician, has certainly led to the “Big Business-loving Republican” caricature that is so common, but I digress.

My view on antitrust issues changed with the antitrust class at BYU where I learned that, by using accepted economic analysis, the DOJ economists could identify whether a merger would increase or decrease consumer well-being.

If we are in favor of competition, how much power do we want the federal government (DOJ) to have in policing competition? To prevent illegal activity (yes, the definition of “illegal” here may be dubious), the gov’t should arguably possess a credible threat—usually the litigative process—but that threat has the potential to mire the company in court hearings for several years, and castrate its innovative impulses. That is something everyone should oppose.

I certainly don't find my internet activities limited by Google's business model. Do you?

If you have tips, questions, comments or suggestions, email me at mattlybbert@gmail.com.