Rick Kelo - A Thought on Monopolies

Rick Kelo

What most people picture when thinking of a monopoly is a big company.  But sheer bigness alone isn't enough for a company to be a monopoly.  In order to function as a monopoly a company has to be able to withhold supply from the market in order to drive the price up.  When they can accrue a higher profit than the firm would be able to earn in the market that extra is what's known as a "monopoly profit."

In studying the history of anti-trusts Rick Kelo noticed that the majority of the monopolies in the 20th century existed in socialist countries.  Every case of actual monopoly only existed when the government granted either:

1. Special protection from domestic competition.  For example PDSVA in Venezuela has no domestic competition because the State seizes any domestic oil and gifts it to PDSVA.
2. Tariffs or import restrictions that grant protection from being under-cut by foreign competition.  Standard Oil, in America, was able to grow large because a very high tariff on kerosene protected them from foreign competition.

When we research monopolies, as Rick Kelo did, an odd pattern emerges.  We discover that very few so-called monopolies in America in the 20th century were actually monopolies.  They were accused of being monopoly based on sheer bigness alone, but even Standard Oil never withheld supply in order to raise prices.  Kerosene prices went from over 30 cents a gallon in 1869 (when Standard Oil began to grow) to a mere 8 cents a gallon by the 1880s.

Richard Kelo - the real trickle down in politics

Ever heard the term "trickle down economics"?  It was a pejorative, kind of a high-brow insult, aimed at those during the Reagan administration who advocated reducing tax rates on the wealthy on the grounds eventually the benefit would "trickle down" to everyone.

However, the real theory of trickle down is what's advocated by Socialists. They claim that giving all money & resources to the control of a government will create a benefit that trickles down to the middle class and the poor.

Both are equally absurd says Rick Kelo, a public finance expert.  Instead of advocating policies aimed at redistributing private property from one group to another he suggests leaving people in peace.  Then they can voluntarily cooperate with one another.  An entrepreneur can invent a way to better people's lives, and if consumers feel they're made better off by purchasing it they will.

Rick Kelo