Talk:Natural monopoly

This was the original article. I'm not sure it jibes with my understanding of the subject, but maybe I misunderstand what's being said:

a specific case of a monopoly. It's existence is justified by the specific cost structure the monopolist, which barrs other competitors from entering he market by making it impossible for him to produce and sell his goods at a profit. A good practical example is a railway company - a competitor would have to build a second set of tracks in a specific area in order to be able to enter the market. Technically this implicates that the monopolists' long term average costs (LAC) and long term marginal costs (LMC) decrease when the output Q increases.

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LA2: Either way, you should keep the pointer back to monopoly. Pointers are always useful, whether they point to related or opposite words. (I have no informed opinion on the economic theory here.)

However, I do have an uninformed opinion: I think it is an open matter of discussion whether any "natural" monopolies exist. It is very hard to do experiments on the national or continental scale, so tradition or ideology has determined what gets to be a monopoly. Radio and TV stations were governmental monopolies in most west European democracies for most of the 20th century. Each city has a municipal monopoly for street lights. Each country has a monopoly currency. Some libertarian economists might think we could handle multiple currencies, regulated by private banks, and there would be no need for a central bank. Maybe this uncertainty should be reflected in the definition.

ACoward: A natural monoploy has a exact meaning in economics and it does exist. It is a good that has the average cost curve above the marginal cost curve at the point that the demand curve intersects the marginal cost curve. If perfect competion exists, the price will be set where the marginal cost curve intersects the demand curve. Since this is below the average cost curve, in the event of perfect competion all the businesses lose money, so perfect competition cannot exist. This causes one of three possibilities: either the government takes over the market, the market dies, or the government grants a monopoly/oligarchy to some party. A classic example of this is the market for a book. If anyone can sell the book, than soon the cost will equal the marginal cost (ie. the cost of the paper) and there will be no money for the author, hence the goverment grants a monopoly of copyright.

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"Because the great majority of consumers have decided that its product provides the highest value (in terms of quality versus price) in comparison to competing products. Therfore, the ability of competitors to profit by offering a similar product is severely restricted without producing one that offers what those consumers gauge to be a more desirable quality/price ratio." This is not a natural monopoly, it is either branding or straight-forward competition or possibly network effect. There is nothing "natural" about a firm producing a product so good and so cheap that all other firms go bust. Its ability to do so may be founded on a natural monopoly (eg first mover advantage or natural resource control), but that case is already covered. Rd232 20:57, 28 Dec 2004 (UTC)

Look again at the definition of natural monopoly in the article. If what I presented is the reason why no other competitors are providing a like product in the marketplace, then ....that's one of the ways in which a "natural monopoly" can arise. What's the problem ..does this not fit in with the anti-business bias of the article? (RJII) Dec 28

So what you're basically saying is, a monopoly is "natural" if the government has no hand it. YOU CANNOT REDEFINE ECONOMIC TERMS TO SUIT YOUR POLITICAL POV. If you are not clear on what a natural monopoly is THEN PICK UP AN INTRO ECONOMICS TEXTBOOK, a request I believe I made to you before. Rd232 23:11, 28 Dec 2004 (UTC)

Also, look at the article for "monopoly." It distinguishes between the two kinds of monopoly --coercive, and natural. A natural monopoly is one that arises without government intervention and support. Also look in that same article where it talks about "natural monopoly." It says that "sometimes" a natural monopoly results by ...what you said. That article is pretty much on track. This one needs some work. (RJII) Dec 28

To quote in full what the article monopoly has to say about natural monopoly:

Monopolies are often distinguished based on the circumstances under which they arise; terminologies differ, but one of the most common is to distinguish natural monopoly (also known as de facto monopoly) from government-granted monopoly (also known as de jure monopoly or coercive monopoly).

This quote does NOT "distinguish... between the two kinds of monopoly --coercive, and natural." CAN YOU *&£$%! READ?? Rd232 23:11, 28 Dec 2004 (UTC)

Calm down. No need to be rude. (RJII) Dec 28

Sorry. Was about remove the above, but you've already replied to it now. Rd232 23:15, 28 Dec 2004 (UTC)

No prob. (RJII)

I have edited the above on the monopoly article to remove the reference to "coercive monopoly". Insofar as the term is used at all (not much outside wikipedia mirrors/forks), it refers to a monopoly on coercion (legitimate use of force), not natural monopoly. Rd232 23:11, 28 Dec 2004 (UTC)

Ok, I'll put it back, then. (RJII) Dec 28

.."coercive monopoly" comes up on Google 1530 times, while "de jure monopoly" comes up 446 times. Which is more popular? (government-backed monopoly comes up even less) (RJII) DEC 28

"Goverment monopoly", 54,700, "legal monopoly", 21,700. In any case, "coercive monopoly" is strongly POV, and in academic circles at least it refers to a monopoly on the use of force. Most Google hits seem to trace back either to Wikipedia/forks/mirrors or to a few US conservative websites. There is no reason to put this incorrect and misleading usage in an encyclopedia when there are more popular and more neutral terms. If you insist on having it, I will insist on describing within the article the obscurity and incorrectness of this term. Rd232 00:45, 29 Dec 2004 (UTC)

"coercive monopoly in academic circles at least it refers to a monopoly on the use of force"....not in my academic circle. (RJII) DEC 28

Aha, and what academic circle would that be? Rd232 09:51, 29 Dec 2004 (UTC)

I do insist. The Post Office example below is truly a monopoly that exists by coercion. It's literally the correct term. Coercion is exactly what is happening. Coercive monopoly may not be a politically correct term to some, since they might like to see a more euphemistic label that allows one to overlook what is happening. So go ahead and start describing. I'll be right there making sure it's neutral and correct, as usual. I'm sure it's for the best that it's out there in the open for all to see. (RJII) DEC 28

"Government monopoly" is a euphemism? Words fail me. NB The PO does not "exist by coercion", a phrase that suggests mafia tendencies. The PO monopoly exists by law, which like all laws is in the very final instance backed up by the government's monopoly of the use of legitimate coercion, a monopoly which for democratic governments is validated by elections. Calling it a "government monopoly" is standard and neutral; the term is used equally by those who approve or disapprove of the idea and of particular examples. I pause to laugh at the fact that I have to explain this to (I hope) an adult. Rd232 09:51, 29 Dec 2004 (UTC)

"Coercion" doesn't refer to "legitimate" or "illegitimate" use of force. That would be a value judgement or bias on your part. Coercive monopoly refers to a monopoly that exists as the result of coercion. For example, the U.S. Post Office is one. Law, backed by physical force, forbids competition in that arena. If you try to compete with its particular kind of service (delivering letters to mailboxes), force will be initiated against you. That's coercion. A natural monopoly on the other hand, arises and exists without coercive influence. It's the only kind of monopoly that could exist in a free market. (RJII) Dec 28

Bad writing on my part. Should have been "refers to a monopoly on use of force/coercion, usually in the sense of a legitimate monopoly on use of force, i.e. by an institution resembling government." Rd232 00:45, 29 Dec 2004 (UTC)

Article protected

I'm basically happy with the intro as it stands (the rest of the article needs expansion/development, but hasn't been the subject of dispute). Anyone else (notably RJII) please explain what's wrong with it. (And if necessary please pick up an economics textbook, because the term is well-established.) Rd232 11:56, 29 Dec 2004 (UTC)

A natural monopoly is a monopoly that isn't a government-granted monopoly. The article doesn't mention that as it stands now. And for some reason user Rd232 doesn't want to allow other ways that a natural monopoly can arise to be in the article other than the few that ways described already...such as economy of scale, excessive cost to get in, etc. I can only imagine that he has an anti-business bias, anti-market-system bias, or pro-command-economy bias. Everyone has a bias, but that shouldn't prevent information from being presented. (RJII) DEC 29

BS. I have a pro-economics bias I do not apologize for. I have a degree in economics. You? Rd232 17:14, 29 Dec 2004 (UTC)

The less you know about me the better. What kind of degree I have or don't have doesn't matter at all. Your degree is irrelevant as well. It means nothing here. (RJII) DEC 29

"A natural monopoly is a monopoly that isn't a government-granted monopoly." This statement is

• wrong
• incorrect
• not the case
• erroneous
• fallacious
• not true
• so very wrong
• an ex-statement (Sorry, that last one's something else.)

Wow, you're very confident aren't you? I'm not so sure it's a good idea to have a discussion with someone that is so absolutely sure of himself. That says a lot. (RJII) DEC 29

A natural monopoly is a monopoly which arises from the cost structure of the industry (L-shaped LRAC). The things that you want to include are plain-vanilla monopoly. (Government-granted legal monopoly can exist in a natural monopoly industry - this just legally fixes what is already the case, possibly ensuring a publicly-owned monopoly; but raises dynamic issues since tech development may alter the nature of a natural monopoly over time, and a legal monopoly might prevent competition arising from this.) Rd232 17:04, 29 Dec 2004 (UTC)

I already made my case. Case closed as far as I'm concerned. (With that guy at least) (RJII) DEC 29

No, Rd232 is correct. Could you cite us a source for your view? Meelar (talk) 20:16, Dec 29, 2004 (UTC)

Sure, here's one: http://www.auburn.edu/~johnspm/gloss/index.html?http://www.auburn.edu/~johnspm/gloss/natural_monopoly.html

(RJII) DEC 29

And another: http://www.econlib.org/library/Enc/Monopoly.html (the definition is at the bottom of the article)

I'm sure you can find more on your own. A natural monopoly is one that exists naturally, meaning, not as a result of government intervention. Government intervention is frequently called in because a natural monopoly exists. (RJII) DEC 29

Those links do not support your idiosyncratic view.

• "The main kind of monopoly that is both persistent and not caused by the government is what economists call a "natural" monopoly." (Stigler);
• "Natural monopoly: A monopoly that does not arise from government intervention in the marketplace to protect a favored firm from competition but rather from special characteristics of the production process in the industry under the current state of technology." (Paul Johnson). Read those words carefully, think about what the article says about LRAC, and realise that a natural monopoly is based on industry cost structure (falling LRAC), and nothing else. Spelling it out: government-created monopoly and natural monopoly are different subsets of "monopoly"; there are also other subsets which fall into neither category. Capice? Rd232 20:54, 29 Dec 2004 (UTC)

I suspect that all this nonsense just derives from your wish to define government intervention as the opposite of what is natural. Rd232 20:54, 29 Dec 2004 (UTC)

Right. These articles both miss that there are monopolies which are created neither through government nor through economies of scale. Meelar (talk) 20:57, Dec 29, 2004 (UTC)

I agree. That's what my other point has been. A natural monopoly can come to be by other ways besides economies of scale. (RJII) DEC 29

No, natural monopoly refers only to monopolies that come about due to economies of scale. As your source puts it, "natural monopoly arises when there are very large 'economies of scale' relative to the existing demand for the industry's product." Meelar (talk) 21:03, Dec 29, 2004 (UTC)