Is regulation the backdoor or indirect way to create monopolies?
Government can create monopolies intentionally (or otherwise, I hope) by burdensome taxation and regulation.
Taxes and regulations usually hurt the new business or smaller businesses harder than the bigger, (or politically well-connected) businesses. Doesn't that limit competition to some extent, and create a degree of monopoly for the existing or larger businesses?
So many people want to start a business, and in most cases they are in competition with much larger companies, but they do not even try or they give up because the tax and regulatory hurdles are just too high for them to jump over.
Does anyone else see it this way?
Is regulation the backdoor or indirect way to kill competition and ultimately create monopolies?
btw.....I am not saying it's deliberate. It could be well intentioned, although misguided. I come from a business family beginning with my father, and both my husband and I were former business owners. I ask this from a personal experience perspective.
"Frequently the distribution system heavy systems allow for only one firm to be profitable in a particular market, thus a natural monopoly is the only workable solution, regulation recognizes this consequence and restricts the operator so that he does not take advantage of this monopoly power unjustly."
That's exactly what I am saying. If the regulation restricts the large business, imagine what it does to the small business. There is one book of regulation for an entire industry, not separate regulations depending on size. Do you see what I mean?
Taxation best answer:
Answer by Bolide ⌡shinning bacon of hope...⌠
no.
The "Invisible hand of the free market" rewards firms which use part of their profits to expand their market share at the expense of competitors who do not do likewise, and to take over the market share of competitors. This motivation will, especially in markets where the provider is required to have a huge fixed cost, such as a physical distribution network (think railroads, utilities, etc) tend to reduce the number of firms in competition until there is an oligopoly or monopoly situation.
Frequently the distribution system heavy systems allow for only one firm to be profitable in a particular market, thus a natural monopoly is the only workable solution, regulation recognizes this consequence and restricts the operator so that he does not take advantage of this monopoly power unjustly.
The free market works perversely where it is unprofitab;e for new competitors to enter the market. Pretending this isn't so will only make things worse.
Taxation
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