Per Bylund Profile picture
May 3, 2018 13 tweets 3 min read Twitter logo Read on Twitter
Three commonly held but untrue views seem to nicely summarize this "report":
1. Selling your goods below cost is a success strategy
2. Being "big" means you cannot be disrupted
3. Government wants to save us from "market power"
#1 only produces a return if one can then raise prices and still sell big volumes *and* no one else can enter the market. How can firms "protect" their staked-out market space? Without government privilege there's only one way: by offering goods of higher quality at lower prices.
So to be successful, either the firm produces better goods or they're more efficient (lower cost). Neither is much of a problem for consumers. And if they charge prices above what consumers think it's worth, both the good itself and the purchasing power of their money, they fail.
#2 seems blatantly false: small/new firms replace incumbents all the time. Innovations aren't stopped or unable to provide value to consumers because the incumbent firm is "big." Unless, of course, entrepreneurs are not *allowed* to compete (again, that's government).
Wouldn't big, powerful firms just "buy out" entrepreneurs? That's reverse logic that assumes the outcome: they need to become big and powerful first. How? Certainly not by buying out competitors.
But let's assume a firm is "big." They can only buy out entrepreneurs if (a) entrepreneurs are willing to sell and (b) the incumbent makes enough money to buy out the constant flow of entrepreneurs/innovators entering the market. Why is (a) assumed to be true? And why (b)? How
can you make money while constantly needing to pay entrepreneurs what they demand for not entering the market? By charging high prices, is the answer. Okay, but those high prices are exactly what attracts entrepreneurs to compete this market! The argument is simply BS.
So #1 and #2 can logically only be true for one reason: there is undue (that is, uneconomic) influence that a firm has over a market that excludes others. What is such influence? It's not that the firm is so much better at satisfying consumers than consumers, because that's only
ever a temporary state - and cannot by any means be called a problem. A problem consisting of a business making profits because they're "outrageously" providing consumers with a lot more value than others can possibly do?
It will only be sustained until the next innovation: new consumers' goods, new production techniques, new organization forms, new uses for natural resources, etc. You cannot protect yourself from these things running a business.
Except... you can, if you manage to acquire special privileges from a power that places extra-economic limits, restrictions, and rules on economic action. In other words, if government grants a firm with monopoly privilege, innovators are prohibited from challenging it. Only then
can you raise prices above their market level and safely continue to do so - because the cost of inefficiency can be transferred onto consumers. But that's a result of artificial barriers to entry that must be caused by non-economic, mandating action: government.
The "solution" to the problem is the only reasonably logical cause of it. The stated arguments assume the conclusion, which simply comes down to very bad thinking. Or, as is commonly the case, anti-market ideology disguised as an economic logic. #fail

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More from @PerBylund

Aug 24, 2018
There's a whole lot of buzz about the #sharingeconomy. Many seem to think it is something new, with some calling for a 'new economics' to explain it while others deride the 'gig economy' as a higher level of exploitation, inequality, and poverty. Neither is a good analysis.
First things firs: the sharing economy was facilitated by advances in technology alongside consumer preferences changing from goods to services and thus from ownership to lease. These are not separate processes, but mutually constituting changes where each increases the other.
The advances in technology that brought about the sharing economy are those that allow for cheaper, faster, and more accurate communication, verification of factual claims, decentralized corroborated trust/reputation etc. They overall lower transaction costs by making information
Read 20 tweets
Aug 17, 2018
Scarcity is a somewhat misused term in policy and popular-economic commentary because it is used in the sense that something is scarce if it is valuable and we have "almost run out" of it. Hence "post-scarcity" is made out to mean "we have plenty." But scarcity as "almost out of"
is a terrible definition for actual analysis, and thus not how it is used in economics. Because "almost out of" is relative actual use or actual existing reserves - or both. And it assumes value as an objective aspect of the resource, given technology. Any analysis based on such
sloppy, shifting, and interdependent definitions will itself be sloppy, shifting, and indistinct. As usual, therefore, the terms mean different things in economic analysis than they mean in everyday speech. (Just like 'theory' in science means 'the best bloody explanation we know
Read 22 tweets
May 12, 2018
The term #capitalism is highly confusing. The definition is clear enough: the private ownership of the means of production (capital). But the implications are very different depending on one's political or economic perspective. Both are right and wrong. Let's take a look at them.
Politically speaking, private ownership of the means of production provides owners with power. Why? Because society is dependent on production of value, and production is undertaken using capital. Whoever has ownership of capital can then influence society. Consequently, it is
only intuitive that owners of immense capital can make demands from policy-makers, who need to at least consider this perspective when making new laws. So the power of the state (usually thought of as the power of "the people") is in a sense limited by capital ownership. And, no
Read 19 tweets

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