The NonSolution Solution For Fentanyl
May 28 2024
by Kimberly Mann
Dangerous drugs like Fentanyl and an unsecure border are a deadly mix for our hometowns. Compounding the problem by using deceiving totals of illegal border crossing where drugs are known to cross only sweeps the problem under the rug.
LaPorte County Indiana is home to about 110,000 people. According to the LaPorte County Indiana Coroner Lynn Swanson MDI, there…
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i’m mad this is my most liked post right now so look at my cat instead lol
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To talk about monopoly & antitrust, I want to start off with your first day in Econ 101, when you learn "how prices work". The toy model that nearly everyone learns as one of the first things ever is that classic supply-and-demand graph of price and quantity; you know it, I don't need to show it. And in relation to how firms set price in a market, the explanation you get is something like:
"In a world with perfect information, zero transaction costs, rational agents, and no barriers to entry, new firms and/or increased output will enter the market until marginal price equals marginal cost"
This (seemingly) portrays a model where new companies "entering the market" is how prices go down. Like say there are Firms A, B, and C, engaging in oligopolistic pricing for a normal good; what happens is some new Firm X (with the same production costs) emerges with the sole business strategy of "offer prices lower than them because they are skimming" and it drives everyone's prices down in a race to the bottom. That, in a sense, competition between identical firms drives the price equilibrium.
That isn't very true, not in practice and not even theoretically; the 101 stuff just sort of biases you to see it that way. Firm X above is being rational in one way but silly in others; why would it enter a market where its competitors are making healthy profits just to fuck that up, knowing it has no advantage they can't immediately replicate in response? And pay all the fixed costs other firms have already paid to make that 0.1% profit? In real life firms almost never do this, they compete over (actual or perceived) advantage or market segmentation. And it also means that - if all firms are truly the same in a market - cooperating on price, far from being aberrant behavior, is the natural thing to do. Why would I look at my rival firm and lower my price to "undercut" them, knowing that they 100% can just lower it too? We both lose, immediately. In practice, companies often set their prices by looking at the prices of competing firms and matching them!
Many things actually drive the price equilibrium of course, but one of the biggest - and most useful for our purposes - is the substitution effect. If companies defacto cooperate on prices all the time, why is the price not infinity? Well because if you are selling steaks and set the price to infinity, I'm not gonna buy it! I can just buy chicken, for me it's pretty much the same. And chicken is cheaper to make than steak. As a chicken firm, I totally can set my price under your steak and you can never, ever match it; that is a real advantage, one from asymmetries of production. The price of steak is driven by the need to compete with chicken much more than it is driven by the need to compete with "other steaks". And so on down a chain of a million desires and costs and needs.
So to wrap this around to antitrust, there is a common idea out there that monopolistic pricing is increasing from the past because if I look at different industries, so many of them today are consolidated into 2-3 big firms. Your grocery stores are all Giant or Safeway or w/e it is in your city, if you are buying a TV Samsung & LG are half the entire US market. How could these companies not collude on price? Of course they do, and they don't need explicit agreements that would violate extant FTC regulations to do it; they can just softly communicate and feel out cooperation. So you gotta break them up and change the rules so they can't do that.
The trap is thinking this is any different if it was 10 firms - it really isn't! Maybe marginally, sure, and if it was 2000 firms yeah okay the sheer chaos would probably create some price churn; but in the past prices were not driven down by the diversity of firms making price cooperation impossible. The long history of guilds, business associations, chambers of commerce, and so on shows that they had plenty of avenues for cooperation - and often did straight-up set prices. Meanwhile, when Wal-Mart, Target, Aldi, and others all cut prices at around the same time, they are not mainly competing with each other. If they were they would just mutually agree to not do that, without even saying anything! How stupid do you think they are? That isn't hard to do. Instead they are competing with Amazon; with boutique local stores; with restaurants; with the changing price of labor; with shifting consumer sentiment and expectations. The industry concentration doesn't matter.
Until it does of course! Because what is the substitution good for oil? They exist of course, but they ain't cheap; people will still buy gas at gigantic ranges of prices. Here, the fundamental structure of the market is monopolistic - and also a geopolitical clusterfuck, but let's not get into that. Producers openly rig prices sometimes, and antitrust actively regulates against it, and it is a hot mess of governments and companies and all that. Are people who hold patents engaging in monopoly pricing? Obviously, that is the point of patents! It is by design; but there are tons of arguments to be made around creeping exploitation of the IP system. Sometimes hundreds of firms in a dominant market niche will offer complex, bundled products where the price of each piece of obfuscated and the value is subjective, but consensus is you can't not buy the product or you will be screwed and since you can't tell what the product even is, let alone how valuable it is, you can't object when they set the price - I hear these are called "universities", but they go by other names in other sectors.
All of the above are something like "monopolies", which maybe are getting worse over time, but they are monopolies for different, product-specific reasons. I think there is a good deal of FTC work and other reforms that could be done in the US to identify areas where this kind of rent extraction is happening. But what it doesn't look like is opposing blanket industry consolidation. And in fact the correlation is honestly pretty weak. Because identical firm competition does not drive the price equilibrium.
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