In economics and business ethics, a coercive monopoly is any monopoly maintained by coercion. Some use the alternative definition that a coercive monopoly is a form of monopoly where a firm is able to make pricing and production decisions independent of competitive forces because all potential competition is barred from entering the market. ^{[1] [2]} Almost all those who employ the term to label such a state of affairs maintain that it can only be achieved by government intervention, though some note that a merchant can itself engage in coercion to secure a monopoly position. Buyers bargain for good prices while sellers put forth their best front in Chichicastenango Market, Guatemala. ... Business ethics is a form of applied ethics that examines ethical rules and principles within a commercial context; the various moral or ethical problems that can arise in a business setting; and any special duties or obligations that apply to persons who are engaged in commerce. ... Coercion is the practice of compelling a person to act by employing threat of harm (usually physical force, sometimes other forms of harm). ... In economics, a monopoly (from the Latin word monoplium - Greek language Greek monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a kind of product or service. ...

A coercive monopoly is not merely a sole supplier of a particular kind of good or service (a monopoly), but it is a monopoly where there is no opportunity to compete through means such as price competition, technological or product innovation, or marketing; entry into the field is closed. As a coercive monopoly is securely shielded from possibility of competition, it is able to make pricing and production decisions with the assurance that no competition will arise. It is a case of a non-contestable market. A coercive monopoly has very few incentives to improve its products or services and is prone to engage in monopolistic pricing, also known as price gouging ^[3]. Murray Rothbard points out that a provider of goods and services itself may "employ violence" to achieve a monopolistic advantage and says that "a coercive monopolist will tend to perform his service badly and inefficiently." ^[4] Contrastingly, a non-coercive monopoly has no assurance of a competition-free future. As a consequence, to maintain its monopoly position it must make pricing and production decisions knowing that if prices are too high or quality is too low that competition may arise from another firm that can better serve the market. Also called an efficiency monopoly, it has been able to keep production and supply costs lower than any other possible competitor so that it can charge a lower price than others and still be profitable. Since potential competitors are not able to be so efficient at producing, they are not able to charge a lower, or comparable, price and still be profitable. Hence, competing is possible but doing so is not profitable. Whereas, for a coercive monopoly competition is neither profitable nor possible. In such a case, a firm may charge prices as high as it wishes without fear of competition coming in and eroding its market share. Contestable markets refer to a market situation where there are very few, perhaps even only one, firm yet perfectly competitive market outcomes may still be observed (as opposed to expected monopolistic or oligopolostic outcomes). ... Price gouging is a term of variable, but nearly always pejorative, meaning, referring to a sellers asking a price that is much higher than what is seen as fair under the circumstances. ... Murray Newton Rothbard Murray Newton Rothbard (March 2, 1926 – January 7, 1995) was an American economist, historian and natural law theorist belonging to the Austrian School of Economics who helped define modern libertarianism and anarcho-capitalism. ...

Economist Alan Greenspan, asserts that such independence from competitive forces "can be accomplished only by an act of government intervention, in the form of special regulations, subsidies, or franchises" [1]. Those who argue that a coercive monopoly cannot exist without government intervention causing it are typically laissez-faire advocates that oppose anti-trust laws. However, according to business ethicist, John Hasnas, "most [contemporary business ethicists] take for granted that a free market produces coercive monopolies" ^[5] Some recommend that government create coercive monopolies. For example, claims of natural monopoly are often used as justification for government intervening to establish government monopolies or government-granted monopolies, where competition is outlawed and prices are regulated, out of fear that the alleged natural monopoly will price-gouge consumers. This has often been done with electricity, water, and telecommunications. Some economists believe that such coercive monoplies are beneficial because of greater economies of scale and because they are more likely to act in the national interest, while Judge Richard Posner famously argued in Natural Monopoly and Its Regulation that the deadweight losses associated with regulating such monopolies were greater than any possible benefit. ^[6] Alan Greenspan, former Fed Reserve Chairman The Honorable Alan C. Greenspan, PhD, KBE (b. ... Laissez-faire is short for laissez faire, laissez passer, a French phrase meaning to let things alone, let them pass. First used by the eighteenth century Physiocrats as an injunction against government interference with trade, it is now used as a synonym for strict free market economics. ... Media:Example. ... In economics, a natural monopoly occurs when, due to the economies of scale of a particular industry, the maximum efficiency of production and distribution is realized through a single supplier [citation needed]. Some free market-oriented economists argue that natural monopoly exists only in theory, and not in practice. ... In economics, government monopoly is a form of coercive monopoly in which a government agency is the sole provider of a particular good or service and competition is prohibited by law. ... In economics, a government-granted monopoly (also called a de jure monopoly) is a monopoly of a product or service granted by government to an individual or organization/company. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... ... The national interest, often referred to by the French term raison détat, is a countrys goals and ambitions whether economic, military, or cultural. ... Judge Richard Allen Posner (born January 11, 1939, New York City) is currently a judge on the United States Court of Appeals for the Seventh Circuit. ... In economics, a deadweight loss (also known as excess burden) is a permanent loss of well being to society that can occur when equilibrium for a good or service is not Pareto optimal, (that at least one individual could be made better off without others being made worse off). ...

Establishing a coercive monopoly

A corporation which successfully engages in coercion to the extent that it eliminates the possibility of competition, operates a coercive monopoly. A firm may use illegal or non-economic methods, such as extortion, to achieve and retain a coercive monopoly position. A company which has become the sole supplier of a commodity through non-coercive means (such as by simply outcompeting all other firms), may theoretically then go on to become a coercive monopoly if it maintains its position by engaging in coercive "barriers to entry." The most famous historical examples of this type of coercive monopoly began in 1920, when the Eighteenth Amendment to the United States Constitution went into effect. This period, called Prohibition, presented lucrative opportunities for organized crime to take over the importation ("bootlegging"), manufacture, and distribution of alcoholic beverages. Al Capone, one of the most famous bootleggers of them all, built his criminal empire largely on profits from illegal alcohol, and effectively used coercion to impose barriers to entry to his competitors. However, it may be relevant to take into account the fact that government was intervening in the alcohol industry by making manufacture and sales illegal and arresting those in the business, thereby enabling unnaturally high profits, and was not providing the usual service of enforcing trade contracts. A corporation is a legal person which, while being composed of natural persons, exists completely separately from them. ... Coercion is the practice of compelling a person to act by employing threat of harm (usually physical force, sometimes other forms of harm). ... Extortion is a criminal offense, which occurs when a person obtains money, behaviour, or other goods and/or services from another by wrongfully threatening or inflicting harm to this person, reputation, or property. ... In economics and especially in the theory of competition, barriers to entry are obstacles in the path of a firm which wants to enter a given market. ... 1920 (MCMXX) was a leap year starting on Thursday (link will take you to calendar) // Events January January 3 - Babe Ruth is traded by the Boston Red Sox to the New York Yankees for $125,000, the largest sum ever paid for a player at that time. ... Prohibition agents destroying barrels of alcohol. ... This article is about the prohibition of alcoholic beverages; separate articles on the prohibition of drugs in general and writs of prohibition are also available. ... Organized crime is crime carried out systematically by formal criminal organizations. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... This article is being considered for deletion in accordance with Wikipedias deletion policy. ... Bootleg liquor is liquor that is sold with disregard to the applicable laws, regulations, and taxes. ...

There are examples in history where a firm was claimed to have barred competition when there is no use of actual force on its part or on the part of government, and anti-trust action has been initiated to resolve the perceived problem. For example, in United States v. Microsoft link The Plaintiff's Finding of Fact alleged that Microsoft "coerced" Apple Corporation to enter into contracts resulting in the prohibition of competition. ^[7] Eric Raymond, an author and one of the founders of the Open Source Initiative, says "The thing a lot of people somehow missed is that the courts affirmed the findings of fact – that Microsoft is indeed a coercive monopoly" ^[8] Although the court ruled against the company, many continue to argue that Microsoft was not a coercive monopoly ^[9] [3]. Another disputed example, is the case of U.S. v. Aluminum Co. of America (Alcoa) in 1945. The court concluded that Alcoa "excluded competitors." [1] Media:Example. ... United States v. ... The Open Source Initiative is an organization dedicated to promoting open source software. ...

Advocates of a laissez-faire economic policy are quick to assert that a coercive monopoly can only come about through government intervention, and defend these situations as non-coercive monopolies in which government should not intervene. They argue that competition with these monopolies is open to any firm that can offer lower prices or better products --that competition is not excluded. They claim that these monopolies keep their prices low precisely because they are not exempt from competitive forces. In other words, the possibility of competition arising indeed affects their pricing and production decisions. [1] A coercive monopoly would be able to price-gouge consumers secure with the knowledge that no competition will develop. Some see the fact that prices are low as lending evidence to the assertion that a monopoly is a non-coercive monopoly. Laissez-faire is short for laissez faire, laissez passer, a French phrase meaning to let things alone, let them pass. First used by the eighteenth century Physiocrats as an injunction against government interference with trade, it is now used as a synonym for strict free market economics. ...

Undisputed examples of coercive monopolies are those that are enforced by law. In a government monopoly, an agency under the direct authority of the government itself holds the monopoly, and the coercive monopoly status is sustained by the enforcement of laws or regulations that ban competition, or reserve exclusive control over factors of production for the government. The state-owned petroleum companies that are common in oil-rich developing countries (such as Aramco in Saudi Arabia or PDVSA in Venezuela) are examples of government monopolies created through nationalization of resources and existing firms; the United States Postal Service is an example of a coercive monopoly created through laws that ban potential competitors such as UPS or FedEx from offering competing services (in this case, first-class and standard (formerly called "third-class") mail delivery).¹ scheiiiißßßßßee!!!!!!!!!!!!!regional, local; for levels below the national, it is a local monopoly. ... Factors of production are resources used in the production of goods and services in economics. ... Pumpjack pumping an oil well near Sarnia, Ontario Petroleum (from Greek petra – rock and elaion – oil or Latin oleum – oil ) or crude oil is a thick, dark brown or greenish liquid. ... Saudi Aramco (Saudi Arabian Oil Company) is one of the largest oil companies in the world, and the largest in terms of production (bpd). ... Petróleos de Venezuela, S.A. (PdVSA) is the Venezuelan nationally owned petroleum company. ... Nationalization or nationalisation is the act of taking assets into state ownership. ... A previous USPS logo The United States Postal Service (USPS) is an independent establishment of the executive branch of the United States government (see ) responsible for providing postal service in the United States; it is generally referred to within the United States as the post office. ... United Parcel Service, Inc. ... FedEx (NYSE: FDX), properly FedEx Corporation, is a company that offers overnight courier, ground, heavy freight, document copying and logistics services. ...

Government-granted monopolies often closely resemble government monopolies in many respects, but the two are distinguished by the decision-making structure of the monopolist. In government monopoly, the holder of the monopoly is formally the government itself and the group of people who make business decisions is an agency under the government's direct authority. In government-granted monopoly, on the other hand, the coercive monopoly is enforced through law, but the holder of the monopoly is formally a private firm, or a subsidiary division of a private firm, which makes its own business decisions. Examples of government-granted monopolies include cable television and water providers in many municipalities in the United States, exclusive petroleum exploration grants to companies such as Standard Oil in many countries, and historically, lucrative colonial "joint stock" companies such as the Dutch East India Company, which were granted exclusive trading privileges with colonial possessions under mercantilist economic policy. Another example is the thirty-year government-granted monopoly that was granted to Robert Fulton in steamboat traffic, but was later ruled by the U.S. Supreme Court to be unconstitutional. ² In economics, a government-granted monopoly (also called a de jure monopoly) is a form of coercive monopoly in a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation... Firm can have several meanings: Firm - a loose legal term for a company. ... In economics, a government-granted monopoly (also called a de jure monopoly) is a monopoly of a product or service granted by government to an individual or organization/company. ... Coaxial cable is often used to transmit cable television into the house. ... This article focuses on water as it is experienced in everyday life. ... Standard Oil (1870–1911) was a large, integrated, oil producing, transporting, refining, and marketing organization. ... Dutch colonial possessions, with the Dutch East India Company possessions marked in a paler green, surrounding the Indian Ocean plus Saint Helena in the mid-Atlantic. ... Mercantilism is the economic theory that a nations prosperity depended upon its supply of gold and silver, that the total volume of trade is unchangeable. ... Robert Fulton Robert Fulton (November 14, 1765 – February 24, 1815) was a U.S. engineer and inventor, who was widely credited with developing the first steam-powered ship. ...

Economist Lawrence W. Reed says that a government can cause a coercive monopoly without explicitly banning competition but by "simply [bestowing] privileges, immunities, or subsidies on one firm while imposing costly requirements on all others." ^[10] For example, Alan Greenspan, in his essay Antitrust argues that land subsidies to railroad companies in the western portion of the U.S. in 19th century created a coercive monopoly position. He says that "with the aid of the federal government, a segment of the railroad industry was able to "break free' from the competitive bounds which had prevailed in the East." In addition, some claim that regulations can be established that place burdens on smaller firms that attempt to compete with an industry leader. Lawrence W. (Larry) Reed, 51, is president of the Mackinac Center for Public Policy, a Midland, Michigan-based research and educational institute. ... Alan Greenspan, former Fed Reserve Chairman The Honorable Alan C. Greenspan, PhD, KBE (b. ...

Economist Murray Rothbard, noted for his espousal of anarcho-capitalism, argues that the State itself is a coercive monopoly as it uses "violence" to establish "a compulsory monopoly over police and military services, the provision of law, judicial decision-making, the mint and the power to create money unused land (“the public domain”), streets and highways, rivers and coastal waters, and the means of delivering mail." He says that "a coercive monopolist tends to perform his service badly and inefficiently" [4] In addition to moral arguments over the use of force, free market anarchists often argue that if these services were open to competition that the market could supply them at a lower price and higher quality. Murray Newton Rothbard Murray Newton Rothbard (March 2, 1926 – January 7, 1995) was an American economist, historian and natural law theorist belonging to the Austrian School of Economics who helped define modern libertarianism and anarcho-capitalism. ... Anarcho-capitalism refers to an anti-statist philosophy that embraces capitalism as one of its foundational principles. ...

Political Debates

In ordinary language, to call something "coercive" usually implies a condemnation of it. But it should be remembered that "coercive monopoly" is a term that admits of a technical economic definition, and describes a particular form of monopoly without necessarily making any claims about whether such a monopoly should or should not exist. Thus, there are at least two distinct questions involved in political debates over what are claimed to be coercive monopolies: Coercion is the practice of compelling a person to act by employing threat of harm (usually physical force, sometimes other forms of harm). ...

1. Whether the methods through which a particular monopoly is established and maintained are coercive (i.e., in fact prohibitive of competition)
2. Whether establishing and maintaining a monopoly through coercive mehtods is justified

Debates on the first question are usually tied to debates over the nature of barriers to entry. What some regard as a barrier to entry, others may not. In economics and especially in the theory of competition, barriers to entry are obstacles in the path of a firm which wants to enter a given market. ...

Debates on the second question typically often focus on whether coercive monopolies created or maintained by government intervention, such as through subsidies, state monopoly, or government-granted monopoly are morally or legally justifiable. (There are relatively few explicit defenders of private rackets.) Advocates of laissez-faire economic policy usually oppose all government-enforced monopolies on principle, as restraints on the free market (which they condemn either as a violation of natural rights, or as inefficient on utilitarian grounds, or both). Defenders of economic intervention often claim that without government intervention, big business is able to dominate economic activity to the detriment of workers and consumers--possibly by forming private cartels or monopolies--and that state monopolies or government-granted monopolies are one tool — along with others, such as anti-trust legislation — by which a democratically accountable government might be able to exert popular control over big business and promote the people's legitimate interests. In economics, government monopoly is a form of coercive monopoly, in which a government agency is the sole provider of a particular good or service and competition is prohibited by law. ... In economics, a government-granted monopoly (also called a de jure monopoly) is a form of coercive monopoly in a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation... Racket can denote: a systematised element of organized crime a sporting implement, otherwise: racquet This is a disambiguation page — a navigational aid which lists other pages that might otherwise share the same title. ... Laissez-faire is short for laissez faire, laissez passer, a French phrase meaning to let things alone, let them pass. First used by the eighteenth century Physiocrats as an injunction against government interference with trade, it is now used as a synonym for strict free market economics. ... A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy... Natural rights (also called moral rights) are universal rights that are seen as not contingent upon being granted by government. ... Utilitarianism is a suggested theoretical framework for morality, law and politics, based on quantitative maximisation of some definition of utility for society or humanity. ... Statism is a term to describe an economic system where a government implements a significant degree of centralized economic planning or intervention, as opposed to a system where the overwhelming majority of economic planning occurs at a decentralized level by private individuals in a relatively free market. ... Big business is a pejorative term referring to large corporations alleged to have disproportionate political and economic power, or otherwise be faceless, selfish, and indifferent to the needs of the general public. ... A cartel is a group of legally independent producers whose goal it is to fix prices, limit supplies and limit competition. ... In economics, a monopoly (from the Latin word monoplium - Greek language Greek monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a kind of product or service. ... Media:Example. ... Big business is a pejorative term referring to large corporations alleged to have disproportionate political and economic power, or otherwise be faceless, selfish, and indifferent to the needs of the general public. ...

Some free market advocates argue that these fears are misguided, in part, because the only coercive monopolies that can remain economically stable in the long run are maintained by government intervention: they point out that many of the usual claimed examples of coercive monopoly --such as Standard Oil --were not monopolies at all, much less coercive monopolies. For example, Standard Oil had 64% of the oil refining market in competition with over 100 competitors at the time of trial which ordered the breakup of the trust. And, in the case of AT%T, it is claimed that they gained much of their profits and their dominant market position from government granting them monopoly status. They argue that under free market competition, any firm that tries to exercise monopoly power will thereby create economic incentives for competitors, and thus undermine its own monopoly status. Advocates of this line often reject the concept of a natural monopoly as a myth used to justify what they regard as irrational intervention into the free market. Standard Oil (1870–1911) was a large, integrated, oil producing, transporting, refining, and marketing organization. ... In economics, a monopoly (from the Greek monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a kind of product or service. ... A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy...

Footnotes

1. Lysander Spooner started the commercially successful American Letter Mail Company in order to compete with the United States Post Office by providing lower rates. He was successfully challenged by the U.S. government and exhausted his resources trying to defend what he believed to be his right to compete. Lysander Spooner (January 19, 1808 – May 14, 1887) was an American individualist anarchist political philosopher, abolitionist, and legal theorist of the 19th century. ... American Letter Mail Company stamps The American Letter Mail Company was started by Lysander Spooner in 1844 order to compete with the United States Postal Service monopoly. ...

2. For about six months, Thomas Gibbons and Cornelius Vanderbilt, operated a steamboat with lower fares in defiance of the law. Gibbons took his case to the U.S. Supreme Court. His case was successful. The Court ruled that the government-granted monopoly was an unconstitutional violation of interstate commerce. Fares immediately dropped from 7 to 3 dollars. ^[11] Cornelius Vanderbilt Cornelius Vanderbilt (May 27, 1794 – January 4, 1877) was a U.S. entrepreneur who built his wealth in shipping and railroads and was the patriarch of the Vanderbilt family. ...

See also

• Non-contestable market
• Free market
• Government-granted monopoly
• Government monopoly
• Natural monopoly

In economics, a contestable market is a market in which competitive outcomes can be observed. ... A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy... In economics, a government-granted monopoly (also called a de jure monopoly) is a form of coercive monopoly in a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law, regulation... scheiiiißßßßßee!!!!!!!!!!!!!regional, local; for levels below the national, it is a local monopoly. ... In economics, a natural monopoly occurs when, due to the economies of scale of a particular industry, the maximum efficiency of production and distribution is realized through a single supplier [citation needed]. Some free market-oriented economists argue that natural monopoly exists only in theory, and not in practice. ...

References

1. ↑  Greenspan, Alan, Antitrust, in Capitalism:The Unknown Ideal by Ayn Rand.
2. ↑  Branden, Nathaniel, ''The Question of Monopolies, from The Objectivist Newsletter (June 1962)
3. ↑  Kudlow, Lawrence, The Judicial Hacker, in Jewish World Review (June 14, 2000)
4. ↑  Rothbard, Murray, The State Versus Liberty in The Ethics of Liberty by Rothbard (1982)
5. ↑  Hasnas, John. The normative theories of business ethics: a guide for the perplexed. in Business Ethics Quarterly v. 8 (Jan. 1998) p. 19-42 ISSN: 1052-150X Number: BSSI98006753
6. ↑  Posner, Richard A. Natural Monopoly and Its Regulation (ISBN 1-882577-81-7).
7. ↑  Plaintiffs' Joint Proposed Findings of Fact in U.S. v. Microsoft.
8. ↑  Silicon Valley, AOL TW React With Caution in The Industry Standard, (June 28, 2001)
9. ↑  Sperry, Paul. The politics of personal (wealth) destruction in WorldNetDaily (2000).
10. ↑  Reed, Lawrence. Witch-Hunting for Robber Barons: The Standard Oil Story The Freeman, a publication of The Foundation for Economic Education, Inc., March 1980, Vol. 30, No. 3.
11. ↑  Folsom, Burton W. The Myth of the Robber Barons. Young America, 2003.

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External links

• The Question of Monopolies Nathaniel Branden defines and discusses coercive monopoly
• Antitrust Policy As Corporate Welfare by Clyde Wayne Crews Jr "Coercive monopoly power does not emerge from the transitory outcomes of the voluntary exchanges that comprise the marketplace. It is hoped that policymakers will come to recognize that government cannot protect the public from monopoly power, because it is the source of such power."
• Antitrust Laws Harm Consumers and Stifle Competition by Edward W. Younkins "a coercive monopoly is closed entry that can only be achieved by an act of government intervention in the form of special regulations, subsidies, or franchises"
• Antitrust by Alan Greenspan examines "whether active competition does inevitably lead to the establishment of coercive monopolies"
• The judicial hacker by Lawrence Kudlow "Microsoft fails to meet the traditional standards of a coercive monopoly"
• Regulation and monopoly by Lawrence Reed - contrasts coercive and efficiency monopoly
• Witch-hunting for Robber Barons: The Standard Oil Story says that government causes coercive monopoly by granting privileges to firms