If he hasn’t already cleaned out his desk and left I’d like to remind John Tamny that the airlines accused in this price fixing scheme were all flying in and out of Heathrow. Heathrow is by far the most desirable airport in London for business travelers and landing slots are severely restricted. To and from the US for example it’s just American, United, British Airways and Virgin. So even if I had access to enough capital or better yet already had planes and shit like Continental and Delta I’d be unable to start flying there. It’s sad to see someone lose his job but the guy had a full week to do a little research on the industry before coming here to make baseless assertions about remedies to anticompetitive behavior. Tsk, tsk.

Shorter John Tamny: The market will provide ponies for all!

(Um, and John, if the firms are colluding to fix prices up then they can also collude to keep prices down to bankrupt any unwanted competition and then drive those prices right back up. It’s shocking, I know.)

He may not know much about economics, but he’s got circular logic down cold. Airlines can collude and raise prices, but consumers still win because more competition will enter the market… who will then be allowed to collude with the other colluders to raise prices. How can consumers lose?

Shorter John Tamny: What isn’t good is yummy!

When two professional wrestlers meet in private to agree on who will win a match, is that really any different than a real fight? After all, somebody’s going to win the fight anyway.

So the existing firms collude to raise prices. Their profit increases, resulting in increased cash reserves.

The invisible hand beckons alluringly, per John Tamny, and a new player enters the market with lower prices.

The established firms immediately (or even sooner) drop their prices to below profitability, relying on their cash reserves to tide them over while they drive the new player out of business.

The invisible hand extends a finger and jams it straight up the asshole of the new player. The new player begins to hemorrhage.

Once the new player is defunct, buy up their remaindered inventory and production equipment at bargain-basement prices and jack the rates up again.

Lather, rinse, repeat. Do that a couple times and no one will be crazy enough to enter the market.

The invisible hand doesn’t give a fuck.

“barriers to entry” ? that sounds like typical Marxist nonsense.

filthy commies.

And dat’s the tooth!

Again I say: I can’t balance my checkbook and need a calculator to do double-digit multiplication and division. But I know tons more about economics than this Tamny twit.

Simple minded truisms don’t equal smart economic policy? That’s unpossible!

I like this most of all: the consumer would ultimately win

Me and the other insulin providers jack up our prices, and eventually another insulin provider comes along and our prices drop back to reasonable levels at some point. You, Mr. Ripped-Off-Consumer, have won! And just to prove it, here’s none of your money back.

I’d challenge Tamny to open a hardware store in a small town dominated by a Wal-Mart. Surely his lower prices will let him prevail! Soon, he’ll run Wal-Mart out of town crying like a baby, and then he can have sex with Live Nude Girls!

Teh markit winz agin!

Simple minded truisms don’t equal smart economic policy? That’s unpossible!

They have served me well as the basis for both my career and romances….

mikey

Liberals never study economics, like the ones here, except that mandated at Marxist universities, which is why they are so stunted in their knowledge and beliefs and biased against hard work and the free market, which DOES work when regulators stay out of it.

Now I understand the free market. It’s all based on collusion!

When two professional wrestlers meet in private to agree on who will win a match, is that really any different than a real fight? After all, somebody’s going to win the fight anyway.

Jake, now you’re just trying to make the trolls cry. Piss on truth, justice, and the American way all you like, but badmouthing the WWF (or NASCAR, or the NRA) is just the kind of gratuitious meanness that convinces our sub-minimum-wage Garys and Kevins that their long hours of lurking are the only bulwark against the ugliness.

Yes, I guess the constant entrance of new airlines into the competitive market means barriers to entry are high. If we believe in free markets, then private actors should be able to set prices as they please.

Ultimately consumers decide. Indeed, there was consolidation in the movie rental industry; one reason for doing so was to reduce the price competition. Of course, Blockbuster, MovieGallery et al are near bankrupt as Netflix and the like entered and destroyed their business model.

And speaking to this host’s comments, yes, monopolies DO exist in the short-term all the time. Of course they do, in that why would investors provide capital unless there were short-term opportunities to dominate the market? Were the host more attuned to commerce, he/she would probably know that Larry Summers, no right-wing type himself, said just this in a speech several years ago.

There are initial monopoly profits but then competition rushes in. If companies can commend high prices from consumers, all the better. This will only lead to more market entrants.

As for the Wal-Mart example, how silly. I wouldn’t start a hardware store to compete with them because they already do a great job of keeping prices down.

But Perfessor — you could beat them, right? All you need is a song in your heart and an extra nickel off retail. You could completely destroy Wal-Mart, right? You’re not scared of them, are ya?

Go on, don’t be a chicken. Prove your point by beating Wal-Mart with a new hardware startup.

You know, this guy is all heart. I was curious about his take on other forms of “collusion”, such as unionizing industries and advocating legal protections for workers. Fair as always, his position is that the consumers will only drive out uncompetitive elements who insist on a little more compensation that the unregulated market will bear; but here, his concern is all for the workers, particularly the poorest.

Shorter Tamny: The EITC creates a labor market that is too hot, driving down wages, while corporate taxes create a market that is too cold, leading to outsourcing. Third-world conditions should be just right to keep America competitive and employed.

“As for the Wal-Mart example, how silly. I wouldn’t start a hardware store to compete with them because they already do a great job of keeping prices down.”

Ya, liberals, that is stupid example. The only way you could keep priced lower is if you were subsidized, and that is wrong. Stop being biased.

The fact is, liberals should work harder and stop looking for handouts from the corporations that keep them all employed. If they have a better idea lets here it. I think not.

I totally want to start an airline on my front lawn, with a sign that says “Flites to Lundun – 10 dolars each”

If some poor sap pays the ten bucks, I’ll put him in my Radio Flyer and shove with all my might. If he complains that he didn’t actually get to London with my airline, I’ll tell him “tough shit, you get what you pay for.”

Put Tamny Fact Softener in your argument today, and watch as two centuries of anti-competitive activity just wash clean away!

Ohhh, another gem:

Ahead of the Mellon tax cuts of the 1920s, a New York Times editorial put it this way: Treasury Secretary Mellon “wants in reality to get more money out of [the rich] than they are now paying. But he proposes to do it by making their rate of taxation lower.”
…
the Mellon tax cuts that set the stage for the Roaring ’20s were “the most ‘progressive’ in history.”

And the economy roared on and on forever, and the bubble never burst – at least as long as the rich kept getting their tax cuts.

The simple reality behind wealth creation is that it occurs when society’s most productive members are left to innovate as freely as possible from governmental roadblocks to growth.

Well, I suppose if the “productivity” of a member of society is being measured by wealth, not actual work done.

Oh, Gilded Age, how we’ve missed you!

The fact is Gary probably lives in a red state that is and has been sucking down a disproportionate amount of federal tax money and is basically stealing from coastal states all the while sending Rethuglicans to congress to denounce welfare queens.

The fact is, Gary’s probably a hick rube.

“The fact is, liberals should work harder and stop looking for handouts from the corporations that keep them all employed. If they have a better idea lets here it. I think not.”

How about an actual free market where competition drives quality and value where you don’t have corporations colluding to fix prices, eliminate competition, and screw the consumer?

I’m guessing your going to say that’s too liberal, right?

I’m always amazed by conservatives who are against gay rights, yet you are all too willing to bend over and take it in the ass from corporations in situations like this. I’d place that in the category of “delicious irony.”

If we believe in free markets

SHAZAM! Nope, I’m not Captain Marvel yet. SHAZAM! Give me a few minutes. SHAZAM!

Where’s Sweet Zombie Jesus when you need him?

Are you kidding, Ted? All of the Republicans on the internets are self-made millionaires with lots of gay and minority friends. Everyone knows that! They all regularly attend liberal cocktail parties where they overhear what anti-American traitors Democrats are in private, so that they can pass it on to their vigilant patriot community.

What’s more, they all used to be Democrats themselves until quite recently, when, just as the rest of the country began to turn against Bush and the Republican lemming march, they were suddenly reinvigorated with the love of God and Country. It’s the political sleeper story of the century, it is! I don’t know why they haven’t been on the cover of Time yet. Oh, right… islamocascist media.

If companies can commend high prices from consumers, all the better. This will only lead to more market entrants.

So in the professor’s world:

A. The airlines collude.
B. Consumers suffer, all to the good of the market.
C. Years later, some brash upstarts order enough new planes to lowball the market after years of collusion.
D. The consumer finally has another choice and rewards the lowball company.

Awesome! Or — you could skip all of the steps above and let the market function as it ordinarily would with no collusion and competition.

Seriously, why is going through the kabuki bullshit better for consumers?

Why anyone bothers paying for college these days is beyond me.

John,

Constant entrance of new airlines to the market? When was the last time a new entrant came into Heathrow and began flying between there and the US or Korea? Remember now that the price fixing you argued is not harmful to consumers took place on just such routes. Routes THAT ARE CLOSED to new entrants.Did you not know that?

“The fact is, Gary’s probably a hick rube.”

Rush would define those people as “rugged individualists.”

The Fact Is, liberals never produce anything of value, so they whine. When we, the heartlanders and the innovators, produce, people buy, we are rewarded. makes sense.

I totally want to start an airline on my front lawn, with a sign that says “Flites to Lundun – 10 dolars each”

No, what you want to say is “Flites in the direction of Lundun” or “Flites toward Lundun”.

“The Fact Is, liberals never produce anything of value, so they whine. When we, the heartlanders and the innovators, produce, people buy, we are rewarded. makes sense.”

Another one I’ll file under “delicious irony.”

Do you anything OTHER than whine?

Maybe John would have a little more sympathy for the consumers being screwed by collusion in the anticompetitive Heathrow market if he knew that they were giant corporations like Pfizer, Citigroup, Morgan Stanley, etc. One of the smartasses who comments here regularly was hired by a big company like that to estimate the extra annual costs they bear from lack of competition at Heathrow. Hint, it’s huge. Now he’s thinking that he should go back to them and sell them an updated study which reflects the impact of collusion.

“When we, the heartlanders and the innovators, produce,”

Also known as, “you want fries with that?”

The Fact Is, liberals never produce anything of value, so they whine. When we, the heartlanders and the innovators, produce, people buy, we are rewarded. makes sense.

Yeah. That Silicon Valley place there in Kansas is a hotbed of innovation, I’ll give you that, Gary…

mikey

“Yeah. That Silicon Valley place there in Kansas is a hotbed of innovation, I’ll give you that, Gary…”

Isn’t that where they “innovated” the double wide trailer?

Well, it’s Friday. That about wraps up the week. Oh wait. I meant to deal with that whoosis – the one who had the temerity to challenge my thinking, Should I bother? A week’s gone by…Yes, definitely. We need to keep these naive upstarts in their place. Hmm, lots of comments here. Well, I’ll just skim over those. They couldn’t possibly know anything either. So, OK…What was this about? Airlines, that’s right. Really, I don’t know that much about the airline industry, but I know more than this whosamacallit. Liberals are hopeless at business. Anyway, I’m talking about a free market, not airlines exactly. In a free market, price-fixing leads inevitably to competition. It’s blindingly obvious if you’re keen enough to see it. Counter-examples are my stock-in-trade. Nobody in my circle ever disputes me. I just need to toss off another example. This’ll shut him up. It’s ironclad…

“No, what you want to say is ‘Flites in the direction of Lundun’ or ‘Flites toward Lundun’.”

Why, is the Government going to come down on me for misleading advertising practices? Bullshit! Bush’ll probably award me a Medal of Freedom!!

“he fact is, liberals should work harder and stop looking for handouts from the corporations that keep them all employed. If they have a better idea lets here it. I think not.”

OR… MAYBE, the “capitalists” should stop looking for handouts from the government. Corporate welfare, tax breaks, no-bid contracts, marvels of the “free market” they are not. How many billions has Wal-mart gotten in subsidies? Who pays a majority of the health care costs for Wal-mart workers? The government?

I think ending government handouts to corporations that make billions in profits and have a very secure market share is a damn better idea.

Reality is that “the invisible hand” of the market only operates in emergent markets with large numbers of providers and buyers. In mature markets, the principals of competitive exclusion inevitably produce oligopolies, which do not behave the way Adam Smith dreamed they do. Opportunity costs and economies of scale effectively prohibit (or at least severely inhibit) new entries into the markets. For that matter, “free markets” are a convenient myth. There is no such thing. All legitimate markets operate within an extensive framework of government regulation which make stable commerce possible (contract law anyone?). The only truly free markets in America (or anywhere else) are in the drug trade and other “black markets”.

Remember when the airlines were going bankrupt and the government gave them billions of dollars from the tax payers? Was that the free market at work too?

I’ve helped the government subsidize more multi-billion dollar corporations that the corporations have helped subsidize me. I always find it funny that wingers scream bloody murder when a homeless person needs some food, but scream with righteous anger when someone suggests that maybe Halliburton should have to earn their muliti-billion dollar contracts via a free and open market like the rest of us simple folk.

Hungry people are told the invisible hand, but Bush will dole out the billions for corporation who know all too well that they can run their company into the ground and always get bailed out. Not surprising since Bush had this same exact set up with his daddy who would always bail him out whenever he drove a company into bankruptcy.

The truth of the right-wing is that they actually do believe in government handouts, just as long as its for a fortune 500 company.

The only truly free markets in America (or anywhere else) are in the drug trade and other “black markets”.

I’ll buy that. If you’re selling crank at 75 bux an eighth, you might think, “hmm, I’ll call a couple other dealers, and we’ll get the price up to 90 bux and we’ll all be better off.”

Of course, you call the other dealer, tell him what you’re thinking, he says sure, let’s do it, then a couple hours later he shows up at your house and steals your shit at gunpoint.

That’s a free market, I reckon….

mikey

“Of course, you call the other dealer, tell him what you’re thinking, he says sure, let’s do it, then a couple hours later he shows up at your house and steals your shit at gunpoint.

That’s a free market, I reckon…”

It certainly works to inhibit collusions and to insure that markets remain competitive. Unlike say airlines, the auto industry, steel, and most other mature noncompetitive markets.

DrDick, you can’t blame it all on Adam Smith: I think he was well aware of the problems inherent in pretending the real world was anything like the theory. I believe he actually wrote words to that effect, although I can’t cite a source.

When I was a little girl (sorry: little kitten), I recall my parents indoctrinating me with stern warnings about free markets, and the invisible hands that operated therein. To this day, I won’t use the toilets at public events for that very reason.

Kinda depends on what you use ’em for, QtA…

mikey

Were the host more attuned to commerce, he/she would probably know that Larry Summers, no right-wing type himself, said just this in a speech several years ago.

This would be the same Lawrence Summers who argued that divestment of holdings in Israeli corporations is anti-Semitism in action, got into a public spat with one of America’s most prominent Black intellectuals, Cornel West, claimed that women may be intrinsically unable to master higher mathematics and the hard sciences, and argued that the a plan of dumping all of the industrialized world’s waste in poor countries was “impeccable”.

If the American political system is so far off-balance that Summers can be described as “no right-wing type”, then things have become so absurd as to be past parodying. Working for Clinton as Secretary of the Treasury is hardly a claim to some form of leftism, as anyone who has read Robert Pollin’s Countours of Descent would know full well. In fact, I commend it to your attention. You might learn some economics from it.

Qetesh the Abyssinian –

You are of course correct. There is also a great quote in The Wealth of Nations (which I cannot find either) to the effect that the interests of capital are not the same as those of society and that just regulations are therefor necessary. I was actually using Smith as a symbolic representative of the free market fundamentalists, who insist on selectively quoting him (much like fundamentalist Christians and the Bible).

I for one am sick of the hand outs that people who work for a living, w/o being fully compensated for their labor, give to corporate executives whose “work” consists of sucking up to stock analysts, business writers & other non-innovative, non-productive types, in order to jack up the corporation’s stock price so that the non-innovative, non-producing executives can profit from their stock options. But that’s just me.

Yes, I guess the constant entrance of new airlines into the competitive market means barriers to entry are high.

If by that you mean, “nearly every day somebody buys a Cessna and starts running flights between Chicago and Fargo,” then yeah. But are you claiming to be a serious economist, and at the same time that new competitors to American Airlines are “constantly” entering the market?

Are you high, or are you insane?

Are you high, or are you insane?

Worse- he’s a supply-sider.

Shorter John Tamny:

Free markets work in three phases:
1. Big multinational conglomerates collude to jack up prices.
2. ?
3. Competition!

So, whatchyer point?

Silly libs.

Don’t you ever just sit back and watch old Reagan speeches?

Totally

When we, the heartlanders and the innovators, produce

Oh, you produce alright, Gary. Problem is, what you produce is something no creature with any sense of smell would want to be downwind of, if you catch my drift.

Why do you hate America? Don’t you know that all must bow to the Invisible Hand Crisco Wristwatch?

Ooooooo. That makes me sooo angry when the tags work in the preview but not on the page. I wonder if this will work.

Make that…

Invisible H̶a̶n̶d̶ Crisco Wristwatch.

I have only a British ‘O’-Level school certificate in Economics, but even I can tell that Tamny is selling us a crock.

Yes, I guess the constant entrance of new airlines into the competitive market means barriers to entry are high.

Constant entrance? I would like proof of this assertion. Can anyone provide me data on the creation of new airlines (as opposed to rebranded subsidiaries of existing lines), along with dates of entry, their penetration into international markets (where they would compete with the oligopolists, as opposed to local/regional markets, where they might find a niche), their assessed market value and their performance?

If we believe in free markets, then private actors should be able to set prices as they please.

Only if pricing takes place on a fair playing field in which the consumer is offered choice. Even the most conservative of economists recognise that monopolies and cartels distort the marketplace and are harmful to the consumer.

Ultimately consumers decide.

But what if they can’t, because of monopolistic practices or price-fixing by cartels? Consumers decide only when they are offered a reasonable choice.

And speaking to this host’s comments, yes, monopolies DO exist in the short-term all the time.

That is a bug, not a feature of economics. It is A Bad Thing that corporations can control markets, even for a short time. It is a symbol of the venal, rapacious, anti-consumer, anti-market side of Capitalism.

Of course they do, in that why would investors provide capital unless there were short-term opportunities to dominate the market?

Because they believe they can provide a better product at a lower cost, not because they believe they can manipulate the market to their ends via non-competitive practice. That’s the way the market should work.

Now, it may be true that some investors stake their money based on the knowledge that a company has some kind of lock on a market, but that’s no justification for anti-market behaviour. Indeed, it’s an argument for better regulation.

There are initial monopoly profits but then competition rushes in.

Fine in theory, difficult in practice. This goes double in manufacturing and technology where the government grants legal monopolies (we call them patents) to corporations.

Look at the problems competitor vendors of computer operating systems and office productivity software have when tackling a monopolist like Microsoft, that is making money hand over fist. Without consumer products like the iPod, and its monopolist control of its own hardware, Apple would be making very thin profits indeed, if any. Linux has the lowest entry cost of OSs in the marketplace (it is free) and is still struggling against Microsoft’s deep pockets, it’s battery of patents, and energetic (and often underhand) attempts to sink its rivals.

If companies can commend high prices from consumers, all the better.

Not for the consumer. Please don’t try to kid us that this benefits anyone but the directors and shareholders of the company.

This will only lead to more market entrants.

Not if a monopolist or cartel can keep competitors out, or at least fend them off for long enough to line their nest.

An assertion that anti-competitive practice will increase competition by raising the stakes and rewards for potential entrants must be classed as magical thinking.

I’m sure there are historical examples of where cartels have been broken purely by competition as opposed to regulatory action, but I’ll wager that those examples are few and far between. More often than not we rely on regulators to undo bad practice. The nature of the legal system means that even this can take many years. As an example of how the process can be dragged out, just look at the antitrust process against Microsoft.

Even where price-fixing cartels are broken, the end result is still that the consumer has been ripped off. And even after competition is restored it is still not a given that the customer will benefit more than if the playing field had been even to begin with.

Speaking as a consumer, I believe my right not to be ripped off takes precedence over the right of a corporation to scam me. This is not an unreasonable assertion, as anyone who truly believes in free markets, as opposed to some law-of-the-jungle principle of winner takes all, would aver.

He is righter than you are. That’s all I’m going to say.

“An assertion that anti-competitive practice will increase competition by raising the stakes and rewards for potential entrants must be classed as magical thinking.”

It does not matter what causes the higher prices. It only matters whether we are right about the barriers to entry, which we aren’t. If we were building the planes, they would be, or if it was true that you had to have a BA-size outfit to be competitive, they would, but we aren’t and you don’t.