Can there ever be truly "Free" market?

[Fried Egg]

By definition, if the government intervenes in the market place, it is not "free". But if established companies attempt to stifle new competition, then can it really be called "free" either?

But what's the solution?

[The Anonymous Sarcast]

By what means to they "attempt to stiffle new competition" ?

By keeping their quality high and their prices low? Is this a bad thing?

By intimidation, coercion, and fraud, etc.? All of those are violations of the would-be competitor's rights. Sue them, take it before a jury, prove your case, profit.

What's so hard about this free market thing again?

[Chuck]

If by "free" you mean no outside agency, such as a government, is imposing any restraints on it then a market can be free. A huge corporation imposing its will on the market is part of the market and that's one of the things that happens in a free market. All members of the market who set prices or decide whether or not to pay prices are trying to impose their wills on it. Some will be better at it than others.

[HyToFry]

As long as the huge corperation is providing a better service/product for a lower price, I have no problem with the "little guy" getting stiffled. I'd rather have a better product at a lower price. Call me greedy.

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The truth is, you could slit my throat, and, with my one last gasping breath, I'd apologize for bleeding on your shirt.

[little guy]

you're greedy.

[PVC Pipe Guy]

~stiffles "little guy"~

[Pablo]

HEY! Get off my turf!

[Samadhi]

TANSTAAFM

[HyToFry]

TANSTAATFM?

[Samadhi]

Bah.

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A one that isn't cold, is scarcely a one at all.

[HyToFry]

^Best sig evar!!!!111

[Samadhi]

Wish I could take credit for it.
http://www.homestarrunner.com/sbemail39.html

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A One that isn't cold, is scarcely a One at all.

[Gomez]

I don't get it. Is it some sort of Matrix reference? A One what? Ice cream?

[This message has been edited by Gomez (edited 06-11-2003 10:45 PM).]

[Lepton]

A beer. In the homestarrunner reference, there is an e-mail about a "cold one", yankee slang for booze.

[HyToFry]

It took me a minute to "get" it... but it was one of those things that, once you do "get it", it's very funny.

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The truth is, you could slit my throat, and, with my one last gasping breath, I'd apologize for bleeding on your shirt.

[Fried Egg]

Is it the case then, that a government (acting on behalf of the people it represents) that takes action to protect it's own producers, not by "intimidation, coercion and fraud", but by imposing tariffs on imports or subsidising domestic production, merely acting freely within the market place?

The government is doing no more to stifle competition (from abroad) than, say, Wallmart is by subsidising it's own stores where there is competition?

However, we defend Wallmart's actions as being legitimate free market behaviour but the government's actions as being an intrusion into the free market.

[Samadhi]

Well, yeah. Walmart is part of the free market. The government isn't.

[HyToFry]

[pikachamp]

free market, where everything is free!

[Vinny]

I love Walmart Superstore where you get to have your oil change while shopping and getting a haircut.

Perfect marriage of services.

[Fried Egg]

Samadhi

[ML]

I think we need a definition or two here. From your first post:

[Fried Egg]

The only real distinction I can think of is that companies (like Walmart) produce something whereas governments do not. If walmart makes enough money to be able to subsidise it's branches where there is strong competition, good for them. A perk of being productive.

But a government that subsidises domestic producers does so, not out of an increase in productivity, but because they can merely command sufficient funds from tax payers.

In otherwords, government subsidy rewards those industries that spend all their efforts lobbying the state for more handouts rather than becomming more efficient and productive.

I think I've just cleared up the muddle in my own head...

[casinopete]

And even if you ignore the lobbying/corruption question (giving man more credit than he's due, I'm sure) - whether taxation in general is right may be arguable, but taxing someone and using the money to destroy their ability to compete in the marketplace is pretty clearly a Bad Thing.

[The Anonymous Sarcast]

What's the difference between WalMart subsidizing their own stors and the government subsidizing businesses?

In addition to the (quite correct) economic analysis Fried Egg already put forward, here's a little morality to throw into the mix:

WalMart doesn't force you to shop at any of their stores. WalMart doesn't put leans on your home if you don't shop at their stores. WalMart doesn't throw you in prison if you refuse to buy their products. Walmart doesn't kill you if you resist being thrown in prison after refusing to shop in their stores. The government can do and does all of these things to acquire the funds to subsidize the businesses that have successfully bought the requisite number of politicians to get the law rewritten in their favor, or to buy the votes of those too lazy to find an occupation that they could legitimately make a living at.

Long live the buggy whip makers!

[Samadhi]

[Pablo]

Originally posted by Fried Egg:

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But Walmart is also hurting the consumer (by eliminating the competition)

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By this ridiculous logic, WalMart could help the consumer by offering him poor service at a high price, thereby helping the competition.

[This message has been edited by Pablo (edited 06-16-2003 02:34 PM).]

[ML]

It's not as ridiculous as it seems at first. What I assume Fried Egg has been referring to is Wal-Mart's rumored (perhaps even confirmed) practice of altering prices depending on the proximity of certain competing stores. They say it's competitive, radical anti-Wal-Mart wackos say that it's evil ... but leaving that argument aside, this is the scenario that comes to many people's mind:

Originally posted by ML's scenario #1:

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I own a store in Middlebury IN, selling widgets. I buy my widgets for $10, sell them for $15, pay $3/widget in expenses, and make a handsome $2 for myself.

Wal-Mart comes to town and sets prices at their "competitive" rate. They buy their widgets (from the same guy) for $10, sell them for $10, pay $3/widget in expenses, and lose $3 on each. (They make this up with sales in Metropolis.) Of course I go out of business.

After I go out of business Wal-Mart sets their prices at the "non-competitive" rate. They buy their widgets for $10, sell them for $18, pay $3 in expenses, and make $5 on each. This goes to finance loses in their newest store in Podunk OH. The consumer has been hurt.

Now of course I could open my store back up (the proper capitalist reaction). But I know that it will take Wal-Mart less than a day to lower their prices again. And I know they can afford to sell at a loss for 3 years. It will take me 3 months to get my store running again, and I can't afford to sell at a loss for any time. I also know that there is no costumer loyalty in widgets. Therefore I make the rational decision and do not re-open my store. Incidentally, this rational reaction would help Wal-Mart get away with this over and over again, where a reasonable threat of an irrational decision on my part would do me a lot of good. Gotta love game theory.

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But in the case of Wal-Mart, I don;t think that's how it usually pans out. I think more appropriate numbers would be:

Originally posted by More realistic scenario:

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My cute, hometown store. Buy widgets for $10, sell for $20, $5 in expenses for a profit of $5 per item.

Wal-Mart, competitive, situation. Buy for $7 (make those suppliers shape up!), sell for $10, $3 in expenses. "Just breaking even to buid our market."

Wal-Mart, non-competitive. Buy for $7, sell for $14, $3 expenses for a profit of $4 per item.

And in the end the consumer benefits, and yet still feels bitter about the bygone days of $10 widgets.

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The danger is that even if secnario #1 is actually the case (which riles the righteous anger of consumers, who write letters to their congressmen), and congress passes a very well-intentioned law, it's very difficult to fix the situation without causing more harm than the extra $1/widget charged by the "evil monopolists".

Actually, there is a fairly good example of scenario #1 going on right now, and I have heard of a solution for the non-Wal-Mart vendor. I'll post it here in a minute. Need a break from typing.

[ML]

Situation I was thinking of in previous post:In a lot of cities (Detroit, Pheonix, St. Louis) more than 70-80% of the flights in or out are by the same carrier (Northwest, America West, and Delta I believe). If I live in one of those cities, that particular airline generally charges significantly more than if I lived in a more competitve city. Low-cost, discout carriers (Southwest, Spirit, Midwest Express, ......) sometimes move in with a few flights, and are often driven out of businesss by the main carrier, which only lowers fares on those particular flights. "Just being competitive". I beleive Sun Country was recently driven out of scheduled service in Minneapolis by Northwest this way, even though everyone thoght they were cheaper, and as-good or better service-wise.
The somewhat workable market solution:The discount carrier needs to get a monster of their own on their side. For a while in Detroit, Spirit airlines made a deal with the auto makers (Ford, GM, and Chrysler), who were sick of paying outrageous fares from Northwest. For a fixed, yearly price, they bought an option to fly any flight they wanted. I believe they had guaranteed seats with 1 week notice, and stand-by when available. They saw the cheaper prices from year to year, and Northwest couldn't get all the business back by selling flights at a loss, due to the year-long commitment.
I don't know if that deal is still going on or not, I heard of it 3-4 years ago. I also don't think that it would work in a more balanced city.

[edit: tons of typos]

[This message has been edited by ML (edited 06-16-2003 04:57 PM).]