[PEN-L:1518] Re: In Defence of Humanism

Enzo Michelangeli em at who.net
Wed Dec 16 03:18:44 PST 1998

-----Original Message----- From: Rob Schaap <rws at comserver.canberra.edu.au> Date: Wednesday, December 16, 1998 1:33 PM

>G'day Enzo,
>You ask:
>>Are you suggesting that the market of telecommunications has traditionally
>>been a free one?!?
>Nope. No market has. Economic transactions ever occur within the field of
>political power. One can't really speak of 'distortions' of prices, as
>this is to imply markets could conceivably do their thing in isolation.
>They can't.
>This is extra obvious in the case of large privatisations of established
>public monopolies, as the government is torn between ensuring the new
>shareholders get good returns and minimal regulatory risk (for PR/political
>reasons) and allowing competitors a real chance to move in. The monopoly
>exacerbates these problems by preparing as well as it can for competition
>by putting in place as much infrastructure as it can to give it the inside
>running in the foreseeable future. The inevitable regulation and
>litigation problems then cost a fortune in time and money.
>All of which is generally not admitted whilst the powers-that-be give
>credit to very skewed competition for (equally skewed) price cuts actually
>brought about by technological developments, some of which were already
>much in place before privatisation, and the rest of which would have got
>there (on all the historical evidence) whether the entity was privatised or
>I guess that's what I'm suggesting.

By and large I agree, but:

1. Without privatization, the monopoly wouldn't have gone, and I've never seen a monopoly giving up its profit. Usually they start whining about the dangers of job cuts in order to blackmail the public opinion (they keep doing it even after: see the current stance of Deutsche Telekom). Perhaps Lucas is too harsh on regulators saying that he's never seen one giving a damn about consumers, but surely their teeth are much less sharp than the competititors'. It is true that technology is the real engine behind costs reduction, but in all these years the carriers have quietly managed to funnel a large share of the savings into their bottom line. Nowadays, the wholesale cost of one minute of conversation across the Atlantic is about USD 0.02, and across the pacific USD 0.06 . Compare these figures with what the end users are told to pay.

2. As in most cases, the real support for the monopolies (and relative inefficiencies, consumers rip-offs etc.) has come from government mandate. So, why tease poor old Hayek? :-)

Cheers --


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