Are Monopolies a Product of the Free Market?

It must be recognized that there are essentially two types of monopolies. One being a state created monopoly which is protected through legislative action (Government granted monopoly). It cannot fail thus is not at the mercy of the consumer. The other being a free market monopoly which is less common but exists due to the fact it "beat" out its competition with a better price and a better product (efficient monopoly). It will not engage in price fixing simply because if it did, it recognizes the fact that at any moment the consumer could turn away. Even John D. Rockefeller, after gaining control of over 90% of the oil industry in the 1800's, refused to raise prices on his oil past his competition because he knew if he did the people would turn to the other 10% of companies and run him out of business. As long as a business is at the mercy of the consumer, it is in their best interest to produce a good product and sell it at a reasonable price. They have no protection from the state and no guarantees of future purchases, so they must continue to enter into fair transactions with their customers. In the majority of cases however, monopolies are created through government intervention in the economy. The term "monopoly" itself began as referring to a special government privilege that protected a company from competition, whether through a franchise, a subsidy, or some other legal restriction on entering a field. Over time we have seen a gradual change in the meaning of what a monopoly truly is. Today we are taught to believe a monopoly is purely when any company gains overwhelming control over a certain market. However, as previously stated, a business that naturally gains control over a market is still at the mercy of the customer, unlike a government created monopoly which is protected by government laws. A government created monopoly can sell a cheap product at an expensive price because you as the customer have nowhere else to go. Their priority is not to please the customer. If a naturally created monopoly attempts to charge more than it should or sell bad product, the window is now open for any competitor to enter the field. They have an interest in keeping their customers happy, a government monopoly does not. No matter the levels of success one individual company may achieve, in a free market it is never free from potential competition. Standard Oil became what it was not because it took advantage of its customers, it became the dominant company in it's market because it created the best product at the best price, and continued to do so even after controlling the market. Alcoa, for example, was the dominant player in the aluminum market for a period of time. Did this result in higher prices? No, in fact lower. Did this result in a worse product? No. Alcoa understood that there was always the threat of competition if they didn't continue to have the best product at the best price. They were driven by the demands of the customer they served, not protected through government laws. Capitalism and the free market play into human emotion. If someone knows that no matter what they do, how hard they work, or what price they charge people are still going to come to them to buy their product, naturally they will work less, charge more, and sell a worse product. They will do as little as necessary. When someone knows that if they don't work hard, if they don't sell a reasonably priced product, and if their product isn't effective they will potentially lose business, they will make sure to provide the best product possible at the best price. We often hear about greed and how evil it is. In a free market of individuals perusing their separate interests and being "greedy", society in general will benefit. The ultimate driving factor behind any business is to make money. Simple as that. When a business is placed in a situation where producing a good product and selling it for a better price=more money, they will go that route. Capitalism uses human nature for the benefit of society. When government comes into play, does human nature change? No, greed still remains. So now you have a business, still full of "greedy" people, who can turn a profit no matter what it does because they have zero fear of competition. How is that fair? When I enter into a transaction with a business, I choose to purchase the product at the price given. It is a win win for both parties because I got what I wanted, the product at a good price, and they got what they wanted, the money. When I am forced to buy from one company at a higher than pleasing price, it is a win lose situation. The company protected by government wins because it got my money, and I lose because I had no choice but to purchase a product at a price against my "opportunity cost." If a naturally created monopoly exists because of "evil" capitalism, how much more evil then is a monopoly created through government force that is capable of destroying the possibility of any competition by law? As a basic review, the term government granted monopoly is used to describe a coercive monopoly in which government, through regulations and law, allows one company to dominate the market with no fear of potential competitors. An efficient monopoly, though it may dominate the market, got to that point by providing the best product and eliminating its competition naturally. However, it is still vulnerable to new competitors thus has an invested interest in maintaining high standards. I hope this basic overview helped to clear up much of the misinformation regarding monopolies. Attributions http://www.princeton.edu/~achaney/tmve/wiki100k/docs/Government-granted_monopoly.html http://capitalism.aynrand.org/capitalist-secrets-there-are-no-monopolies-on-a-free-market/