Korva is a scroll of the internet’s best ideas.
Capitalism is two simple rights
Anti-capitalism is the reverse: limits on who can start a business or take up a vocation, or limits on a person's right to choose what to buy. By that test, taxis are definitely not capitalism, which is why they are not very good and why they cost more than they need to.
Monopolies come from two directions. One emerges because a company is so competitive that it serves the customer best and ends up with all the customers. The other emerges because a company is anti-competitive. Being anti-competitive is illegal in the United States unless a government official or regulator does it for you, and then it is legal.
In the taxi system, regulatory capture is so tight that the difference between the regulator and the taxi company is almost indistinguishable. Crony capitalism looks like that: winning because a bunch of money bought the shutdown of competitors, instead of winning by being the best.
How does regulatory capture happen?
The economist George Stigler argued in a 1971 paper, "The Theory of Economic Regulation," that regulated industries often come to control the agencies that oversee them. The industry has concentrated interests and the resources to lobby, while the public's interests are spread thin. Regulators also tend to draw their staff and expertise from the industry itself. Stigler won the Nobel Memorial Prize in Economics in 1982.
Why is a competitive monopoly legal?
The Sherman Act of 1890 bars monopolization, but courts have long distinguished between winning a market and rigging one. In the 1945 Alcoa case, Judge Learned Hand wrote that a firm which holds a monopoly simply through superior skill, foresight, and industry is not an offender. What the law targets is exclusionary conduct, such as striking deals that block rivals from customers.
Why can government-backed restraints escape antitrust?
The Supreme Court held in Parker v. Brown in 1943 that the Sherman Act does not reach restraints imposed by a state acting as a government. The case concerned a California program that limited the sale of raisins to keep prices up. The ruling created what lawyers call state action immunity. Later cases required that private parties claiming it follow a clearly stated state policy and be actively supervised by the state.
More from David Senra
