How to Think About Monopolies


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The thousand faces of monopolies. Monopolies are villains because they charge “monopoly rents” — they can and often do hold purchasers hostage and jack up prices. To their owners and investors, however, monopolies can also be heroes — they make people rich (as Peter Thiel reminds us). How many of the tech-driven, city-based institutions now being built by NewCos will end up as monopolies? And should we be rooting for that — or trying to shape the rules of the game to encourage competition? For an overview of that issue, see this collection of long-form links (Redef). In the age of hyper-competitive market-winners like Amazon and sharp-elbowed platforms like Uber, antitrust law might well be outdated and ineffective. But if we want to let a thousand Ubers bloom (City Observatory), a few strategic market interventions could make all the difference. When Uber made good on its threat to pull out of Austin after the city passed regulations the company opposed, customers were upset and inconvenienced in the short run. But now, Austin has become a lab for Uber alternatives. We can’t stop innovative companies from winning new monopolies, but we can try to stop them from squashing the next round of innovation.

The rent is too damn low. Traditionally, rent is the price the owner of some scarce asset — land, an apartment, or a service no one else can provide — charges others to use the asset. But there are more creative ways of thinking about rent: You can take some commonly-owned resource, raise its price, and share the resulting income widely — as Alaska did with its oil reserves. Peter Barnes call this “virtuous rent,” and it has applications beyond public lands and natural resources. You can also imagine charging it for collectively owned digital abstractions like namespaces and other kinds of virtual real estate and goods.

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