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Re: Allocation of IP Addresses

  • From: Perry E. Metzger
  • Date: Thu Mar 14 15:58:13 1996

Paul Ferguson writes:
> At 12:45 PM 3/14/96 -0500, Perry E. Metzger wrote:
> >In any case, so what? Economic allocation of resources is, if
> >anything, more important when there is significant scarcity.
> 
> This also creates monopolies where, if this were to occur, would
> give Uncle Sugar plenty of reason to step in and arbitrate and/or
> reallocate.

I hate to argue politics, but you are imposing it upon me.

Monopolies are a chimera, a myth. Almost all monopolies that last for
more than a couple of years have been the result of government
regulation preventing market entry -- AT&T being a shining
example. U.S. Steel was formed as a way of eliminating competition in
the steel industry by merging all the major players. Within a few
years, it had lost some outrageous portion of the market, and without
government intervention. Standard Oil was rapidly losing market share
when it was broken up. J.P. Morgan and friends never succeeded in
keeping a railroad cartel together for more than a month or two before
they thought up the Interstate Commerce Commission as a way of
enforcing cartel agreements by having the government enforce railroad
rates. (This latter bit is not a joke -- almost all government
regulation of this sort started to the benefit of monopolists.) OPEC,
the great oil cartel, exists outside of all government regulation of
its activities. Today, even though its members still control world oil
production, OPEC is almost toothless and oil prices in real dollars
are lower than they were when OPEC first asserted itself.

There have been a few instances of monopolies, but almost always
because a particular company was operating extremely efficiently and
with very low profitability -- these monopolies have almost always
died as soon as either of those conditions changed.

I can direct you to dozens of books on this subject if you wish.

None of this should be surprising. Monopolies and cartels exist in an
unstable position in the economic realm. They are like highly
energetic highly reactive compounds in the chemical world -- if you
sit atop a high energy curve without much needed to kick you off, you
don't exist for long. If you examine where monopolies sit on the
supply/demand curve, if they are to make maximal profit they
inevitably end up producing an unserved section of the demand curve
that will mean a potential profit for a lower cost distributor. In
cartels, "cheating" is always a winning strategy for a cartel maker
because large profits are made by selling more than is allocated by
the cartel -- at least for a while. These creatures, monopolies and
cartels, fly apart very fast once someone senses how vulnerable they
are.

In short, the entire monopoly dragon is a myth created by friends of
government regulation to promote regulation. One might as well worry
about the sky falling.

Perry




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