Tuesday, July 18, 2006

Bully

Thomas Sowell on Time Magazine's celebration of the dawn of legislated anti-capitalism in America (via Gods of the Copybook Headings):

Monopolies are much harder to find in the real world than in the world of political rhetoric. Monopolies raise prices but, in the big industries supposedly dominated by monopolies -- oil, steel, railroads -- prices were falling for years before Theodore Roosevelt entered the White House and started saving the country from "monopoly."

The average price of steel rails fell from $68 to $32 before TR became president. Standard Oil, the most hated of the "monopolies," had in fact innumerable competitors and its oil prices were not only lower than those of most of its competitors, but was also falling over the years. It was much the same story in other industries called "monopolies."

The anti-trust laws which Theodore Roosevelt so fiercely applied did not protect consumers from high prices. They protected high-cost producers from being driven out of business by lower cost producers. That has largely remained true in the many years since TR was president.

The long list of low-price businesses targeted by anti-trust laws range from Sears department stores and the A&P grocery chain in the 20th century to Microsoft today, prosecuted not for raising the price of Windows but for including new features without raising prices. Much of the rhetoric of anti-trust remains the opposite of the reality.

3 comments:

Ian Scott said...

"prosecuted not for raising the price of Windows but for including new features "

This is not entirely accurate. Not that I am disagreeing with the sentiment of the post at all - but there was a bit more (actually, quite a bit more) to the MS thing than "adding new features."

Microsoft was also into telling retailers what products they were going to sell, and what products of competitors of MS should or should not be available on some stores' shelves.

As well, they were selling a product which sometimes made it virtually impossible to install a competitor's product on the PC once MS's OS was installed.

Microsoft has engaged in a whole lotta interesting business practices :)

MapMaster said...

Yes, Microsoft was prosecuted for the other reasons that you have cited, but did they commit fraud or theft? If not, the prosecution was illegitimate, and anti-trust legislation a great criminal wrong.

Ian Scott said...

As I wrote, "Not that I am disagreeing with the sentiment of the post at all."

I was pointing out however, that sometimes even journalists can get their "facts" incorrect, or leave things out.

Whilst all the charges may be illegitimate, to say it was for "adding features" and leaving it at that isn't correct.

Having said that, according to my definition of "ethics," I'd suggest that what Microsoft was (and in some other ways even to this day) doing was unethical although not against any law. Certainly not business practices I'd be proud of engaging in. And as they say, "buyer beware." It took two or three incidents for me to realize what a f**ked up company Microsoft was, and I gladly switched - and learned - a couple of new operating systems.

But we'll leave the "ethics" debate for when Paul McKeevor can join us again ;)