Posted by: graemebird | July 30, 2007

Competition?

Current mainstream theories of competition are wrongheaded, harmful, have to go and are basically economic quackery.

Here is an example of the enemy:

“Well-designed competition law, effective law enforcement and competition-based economic reform promote increased efficiency, economic growth and employment for the benefit of all.

OECD work on competition law and policy actively encourages decision-makers in government to tackle anti-competitive practices and regulations and promotes market-oriented reform throughout the world.”

http://www.oecd.org/topic/0,3373,en_2649_37463_1_1_1_1_37463,00.html

This is putting the cart before the horse. Competition is the RESULT and not the aim of proper reform. And the goal of this reform ought to be the clarification of property rights.

Nowhere is this more difficult then in the field of infrastructural goods. Below I explain why industry associated with infrastructure is-and-will-remain fundamentally uncompetitive…… until we comprehensively reform the legal framework behind the construction/ownership and pricing of infrastructural goods.

From Catallaxy:

A corporation is not owned by the State.
A corporation may be in a competitive functioning capitalist environment. In which case that corporations attempts to profit-maximise…. that is to make as much profits as it can…. (not the ACTUAL making of profits but its attempts to do so)
…. in this situation the attempts to make as much profit as they can are in the interests of the public more generally.

Now what is a functioning market?

Well its not one that has been developed fully formed with big corporations like Gods that have appeared from the brow of Zeus.
And it is not a matter of having 2 or 6 or 20 competitors though generally speaking if there isn’t 2 or 3 somethings probably gone wrong somewhere.
An industry plan that puts up fully-formed corps of gargantuan size does not a competitive environment make.

Rather the idea is to reduce taxeater overhead.

Firms don’t grow big or small on the basis of transaction costs. Its more to do with at what size do you need to be to get a cash-flow that can be expanded with brains and hard work.

If you have a cash-flow then you can get hold of capital goods, employ people, expand the cash-flow, get more capital goods, employ more people.

Now it wouldn’t matter if we had 50 telephone companies or 100 local road monopolies.

The competitiveness isn’t about these numbers.
>>>>>>>>>>>>>>>>>>>>>>>>>

GENERAL UNCOMPETITIVENESS

High income tax will dull the ferociousness of competition and high income tax plus monetary debauch will make such competition positively tepid.
Such that we can forgive a little bit Adrien and Eldridge for invoking the theory of Oligopoly….

… I came down on them on account that it was a technically wrong application of the theory… and plus it was a way of ignoring the real problem (of recent grocery price rises) which was fiat/fractional money-creation and the printing press….

… I came down on them because I wanted to hammer the denialism which suggested that money creation wasn’t the real problem…….

IT FEELS LIKE OLIGOPOLY

…. but I was a bit harsh because if there are these tangential matters sucking away at the ferociousness of the competition then it will FEEL-LIKE-OLIGOPOLY.

It will feel like oligopoly. Dudes via their life experience will watch the way the bigshots in head office act and in a general environment of tepid competition it will FEEL-LIKE-OLIGOPOLY.

Now since this slant… this weakness… this lameness in the competition is not brought on by an insufficient number of competitors the answer to it is NOT to start splitting companies up…

… The answer is to allow the boxers to keep all nine pints of their own blood every week and not give 1 pint up to vampires.

It would be as if in the arena of nature…. It would be as in nature after a massive nuclear war and all this fallout.

And all the animals were suffering from radiation sickness.

The fox still preys on the rabbit. But the rabbit himself moves very slowly and can barely chew that grass. And when the fox catches up with him he’s too tuckered out and sick and the rabbit almost too tired to run away.

The lion lays down with the lamb alright. But only because the lamb is too fucking sick to run away…. And the scrawny Lion is waiting for his appetite to return.

Its competition and there are still many many players. Its competition but it aint that ferocious.
>>>>>>>>>>>>>>>>>>>

We see that in the case of infrastructure its not transaction costs which make it that you have to be a bigshot to get your first reliable-and-expandable cashflow.

If starting with $10 000 in assets you can get cashflow and a return on total assets of 50% per year you can knock telstra off its perch in time don’t doubt it.

You see its not transaction costs that stop the competition from being ferocious..
Its TAXEATER AND LAND-OWNER-TO-LAND-OWNER NEGOTIATION OVERHEAD…….. mainly brought on by lack of clarity in property rights.

To be sure the income tax is a ball and chain around the little guy…. allowing the fatcats, who already have capital, a free ride with less competition from below.
And easy money only makes this lameness much worse…………….

SPECIFIC UNCOMPETITIVENESS WITH REGARDS TO INFRASTRUCTURE.

………….But in the case of infrastructure you have so much taxeater and negotiating overhead since there is no clarity in property rights.

This is an unecessary barrier to entry and no good can come of it.

When Optus put its network together did it have enabling legislation?
Was it basically a tendering situation enabled by industry-policy gurus?
Even if that wasn’t the case the fact is it would have taken a certain size of outfit to have full-time negotiations going with blood-suckers on all three levels of government.

Because the fact is with infrastructure to get any sort of network you have to dig up the fucking road.

You have to dig up the road, the footpath… you have to drill things. You might have to get permission to string the cables along the power lines like I saw in Thailand.

All this must be done under the sufferance of local councils unless the even bigger bully-boys pass enabling legislation for their cronies, their buddies, or in support of their investments in taxeater-ego…..

………All this must be done under the sufferance of local councils unless the State or the Feds overide and force the councils to do as they are told.

>>>>>>>>>>>>>>>>>>>>>>>

Negotiating with thieves and ego-men is a science in and of itself. And these things can always be taken care of if you have the budget for it.

But this makes it a basically non-competitive business since the level of capitalisation or cash-flow where you can afford to have people full-time schmoozing with taxeaters at all levels is obviously not going to produce a Michael Dell or yet even a Lindsay Fox.

>>>>>>>>>>>>>>>>>>>

All institutions come with their own genetic material. Their own history. A history inseperable from the environment they grew up in.

To take an industry entire and have an industry policy wherein there will be at least 6 competitors is missing the point.

A new industry, born out of publicly owned goods… ought ideally be like a new environment on-land after the meteor hits.

All the big boys are gone.. But some big guys might come out of another environment (the sea) or the smaller survivors may grow larger.

But because the nature of the thing is holistic if you try and arrange things by forming various Frankenstein organisms of immense size…. You stitch them together…. They are big nasty-looking guys… And you get six of them………
You push then out into the natural arena…
And you say FIGHT!!!!

FIGHT YOU FUCKERS!!!!!

Go!!!!! Do what you have to do. Rip eachother apart with competition!!!!!
(They are pty-ltd’s….. I thought they would fight?????)

It aint going to work. Its like a childish view of the situation where Kong fights Rex and Rex fights Triceratops even though in the real world these three never once met eachother.

Its not about the big three its about the holistic nature of competition at all levels.

Kong, Rex and Tri couldn’t exist in isolation and wouldn’t fight to death on a moonscape. The big guys ought not be the focus. They ought merely arise out of being successful small guys.

After all their ancestors were all little critters that scurried up trees to get away from bigger competitors or at least thats my theory anyhow.

So a bunch of utilitarian economists…..stitching together some Frankenstein companies like this and calling it “competition”…. well it aint going to work.
It ignores the wider competitive environment.

Your Frankenstein monsters start bleeding from their seams and their bolts.
They are tired. They won’t fight. And inevitably one of them will likely go around and rifle through the wallets of the others when the others are all crashed out and pooped.

This is why its more then plausible for Rudd to start talking about a fibre-optic network.

If the market was a functioning one then it would be a race to see who could have put the most cables in the ground many years ago now.

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Responses

  1. You tell them Graeme and now the next installment of the next chapter in the saga of your arse continues.

  2. Graeme I believe that I may have a three picture deal with Mirimax, but we need the rights to your arse. Sell us your butt Graeme. Your butt is GOLD.

  3. congratulations Yakub. It’s nice to see great talent rewarded.

    you too, Graeme. God gave you a gift. Use it or lose it.

  4. “Your butt is GOLD.”

    Right. Well I would have thought that this was rather old news.

    But I’m not just some “stunt-glutes” you understand?

    You got that?

    I……

    ……am an acTOR!!!

    You get it?

    So I aint interested unless I get to look at the script.


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