[arin-ppml] Fwd: ARIN-prop-165 Eliminate Needs-Based Justification

Tom Vest tvest at eyeconomics.com
Thu Feb 23 20:31:09 EST 2012

Consider how other de facto non-duplicable "bottleneck" inputs that are critical to entering some market tend to be priced (absent regulatory intervention) when the only source(s) for those inputs are incumbent market participants.

There is a straightforward explanation for this behavior, but it seems to get very little attention, straightforward or otherwise, in conventional economics.

In fact, the nearest thing to a straightforward answer that comes to my mind was written all the way back in 1979 by the staunchly pro-market industry guru George Gilder, in a critical Forbes Magazine review of a recently-published book by liberal economist JK Galbraith:

<Gilder>The truth, perceived by Galbraith perhaps better than by most of his adversaries, is that the very essence of capitalism is the competitive pursuit of transitory positions of monopoly. This pursuit is not guided by any invisible hand. It is governed by the quite visible and aggressive hand of management and entrepreneurship. Businesses continually differentiate their products, marketing techniques, advertising and retailing strategies, in order to find some unique niche in the system from which they can reap, as long as possible, monopoly profits. Without the aid of government, protecting patents or otherwise excluding competitors, these monopoly positions tend to be short-lived. But they are the goal of business activity, the focus of creative entrepreneurship, the motivation of research and development. The monopoly positions, moreover, are not at all unlimited, because they are always held -- unless government intercedes to enforce them -- under the threat of potential competitors and substitutes at home or abroad. The monopoly can be maintained only as long as the price is kept low enough to exclude others. In this sense, monopolies are good. The more dynamic and inventive an economy the more monopolies it will engender. The ideal of perfect competition, like the ideal of an economy without monopolies, is also an economy without innovations.</Gilder>*

Of course, for Gilder and most orthodox libertarian/Austrian economic thinkers more generally, the observation that a private monopoly has persisted for generations, or all of human history to date, would be perfectly consistent with the belief that it's only a matter of time before the market produces a better outcome. Private monopolies are "transient" by definition.


*Happy to share the full text of the review with anyone who's interested. The complete reference is:

George Gilder, "Galbraithian Truth and Fallacy," Forbes (November 12, 1979).

On Feb 23, 2012, at 4:59 PM, John Curran wrote:

> Milton - 
>    Is there an fairly straightforward economic explanation that addresses
>    the questions that John Sweeting raised?  If so, could you outline it?
> Thanks!
> /John
> John Curran
> President and CEO
> Begin forwarded message:
>> From: "Sweeting, John" <john.sweeting at twcable.com>
>> Subject: Re: [arin-ppml] ARIN-prop-165 Eliminate Needs-Based Justification
>> Date: February 17, 2012 12:55:52 PM EST
>> To: Milton L Mueller <mueller at syr.edu>, 'Paul Vixie' <paul at redbarn.org>, "jeffmehlenbacher at ipv4marketgroup.com" <jeffmehlenbacher at ipv4marketgroup.com>
>> Cc: "arin-ppml at arin.net" <arin-ppml at arin.net>
>> Hi Milton,
>> A few questions since I am not an expert in markets.  Do you think there is a scenario where the largest and wealthiest of the world's ISP's would buy up as much address space as they could just to keep it out of the hands of their competitors? Or new start ups in their markets?  There are some very wealthy companies out there that would not blink an eye at spending the money needed to run their competitors out of the market but maybe that is not possible in this particular market. Is there a way that a small but well of portion of the market could insure prices are so high that the number of competitors would be capped or even reduced? As I said I am not an expert on markets so would very much welcome your views on this.
>> Thanks,
>> John
>> ...
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