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Chapter 20 Why Oppose Monopoly and Encourage Competition—Market Structure Economics You Must Understand (2)
For the convenience of research, economists refer to this kind of negotiation between enterprises (the oil country can also be regarded as a large enterprise) on production and price as "collusion". The resulting conglomerates are called cartels.It can be said that a market with a cartel is equivalent to having only one monopoly, which fully applies to our analysis of monopoly in the previous section.For example, when OPEC reaches a consensus agreement, they will reduce oil production and increase oil prices, so as to maximize the profit of the entire organization.

Oligarchs hope to form cartels, but this is not always the case.There are two reasons: the antitrust laws of most countries in the world prohibit open agreements between oligarchs; individual cartel members are tempted by profits to increase production, thus rendering their agreements dead letter.After the OPEC uniformly limits the oil output and price of each country, each member country will produce more oil in private in order to occupy a larger market share and profit. Assuming that Iran measures privately in this way, then Iraq will also measure privately in this way. Other oil oligarchy countries will also measure in this way, so that the actual output of oil on the whole will exceed the output of the mutual agreement by a lot, and the oil price will actually be lower than originally planned.

This suggests that oligarchs have a trade-off between cooperation and self-interest.They all hope to achieve a monopoly through cooperation in order to increase profits.But they are also tempted by their own self-interest—increasing production and occupying a larger market, thereby destroying the conditions for achieving a monopoly, increasing their total output, and reducing their prices, so the common profit cannot be maximized.

Economic Liberalism: Advocating the Market Mechanism

Economic liberalism refers to the economic theory and policy system that advocates the market mechanism and opposes human intervention in the economy.

It was originally put forward as a slogan by Darentson, the foreign minister of Louis XV of France. Later, Quesnay and others confirmed that there is a natural order in society that is independent of human will and governs the development of society.Adam Smith preached the principle of "an invisible hand" and further developed the idea of ​​economic freedom.Free economic thought is the center of Smith's entire economic theory.Ricardo has also expounded the same idea.Economic liberalism is an ideological proposition that has played an important role in the capitalist world for a long time.

Economic liberalism is an ideology that supports the rights of individuals to property and freedom of contract.Economic liberalism advocates limiting government manipulation in economic affairs and letting the market mechanism play a role in regulating resources.Economic libertarians are not anarchists and are not universally opposed to the role of government, but the vast majority of case studies show that government intervention is excessive.

Economic liberalism includes Smith's economic liberalism and neoliberalism.

In the book "The Wealth of Nations", Adam Smith, on the basis of inheriting the ideas of his predecessors, further proceeded from the concept of economic man, and made a systematic elaboration of the theory and policy of economic laissez-faire for the first time, and made it This becomes an important idea of ​​the book throughout.He believes that in a commodity economy, everyone seeks to pursue their own interests. Under the guidance of an "invisible hand", that is, through the regulation of the spontaneous function of the market mechanism, each person's choice to pursue his own interests is Naturally, social resources will be optimally allocated.He opposed the mercantile policy and feudal system that restricted economic freedom, and advocated laissez-faire, and the state only played the role of "night watchman".Demand the abolition of feudal manual apprenticeship and residence laws, so that labor can move freely; demand the abolition of laws that hinder the division of land inheritance, so that land can be bought and sold freely; demand the abolition of government intervention and management of industry and domestic trade, such as the abolition of protective tariffs , guild system and specialized companies, etc., so that the production and exchange of commodities can be carried out under the conditions of complete free competition.This kind of laissez-faire thought and proposition undoubtedly promoted the British capitalist market economy, which was transitioning from the handicraft industry to the large machine industry at that time.After that, economic liberalism continued to prevail in the capitalist world for more than 100 years.But the effect of economic liberalism on promoting the development of capitalist economy is limited.

In the 20s, Keynesian state interventionism replaced economic liberalism and became dominant.In the 30s, when Keynesianism was helpless in the face of "stagflation", new trends of economic liberalism emerged in the capitalist world.This point of view holds that: private ownership of the means of production is the premise of all economic activities, especially all activities in the market economy; exchange and the spontaneous operation of the market have sufficient efficiency; free trade is the best foreign trade policy.Neoliberalism is firmly opposed to excessive government intervention.

The difference between neoliberalism and Smith's economic liberalism is that Smith's economic liberalism advocates the implementation of complete laissez-faire, while neoliberalism generally advocates emphasizing economic freedom under state intervention.

To many, economic liberalism means no government or laissez-faire, and even equates to anarchism.This is a misinterpretation of economic liberalism, and it often leads to the abuse or denial of economic liberalism in practice.

According to some scholars who study the history of modern Western economics, the entire history of Western economics is the history of the ebb and flow and replacement of two trends of thought, economic liberalism and state interventionism.In fact, from the basic principles of liberalism and the philosophical foundations of various schools of economics, it can be seen that the entire Western economic trend of thought is also a history of the rise and development of liberalism.Even state intervention trends (with some exceptions) follow the basic principles of liberalism, such as adhering to the private property system, emphasizing economic individualism and free enterprise systems, and pursuing a balance or harmony between the market and the government.

We believe that Western liberal economic theory can basically be divided into two categories, that is, two opposing traditions:

One is to construct the rationalist tradition, arguing that the government’s conscious control and guidance is the guarantee of individual economic freedom, laissez-faire will lead to the loss of freedom, and all human systems are the products of people’s conscious design or invention, emphasizing the need to strengthen the government’s control over Intervention in economic life.

The other is the tradition of evolutionary rationalism (or the tradition of spontaneous order), which believes that under the constraints of appropriate legal rules, everyone’s spontaneous economic activities and the pursuit of their own interests can lead to the formation of social systems and economic order and social public order. The promotion of interests, emphasizing the need to limit government intervention; the view that the human order, including conventions, rules, and institutions, is not carefully designed because people rationally foresee their interests, but that different actors pursue their own goals inadvertent result.In the words of the 18th-century Scottish philosopher Ferguson, it is "the consequence of human action, but not the result of human design".

The difference between the two traditions stems from a different understanding of the role of rationality:

The tradition of constructive rationalism assumes that human beings are born with knowledge and moral endowment, and that reason has the supremacy.Therefore, by virtue of rationality, the individual is sufficient to know and can take into account all the details of the circumstances needed to form social institutions according to the preferences of the members of the society, which enables people to form social and economic institutions according to deliberate consideration. This is a kind of "intellectual pretentiousness".

The tradition of evolutionary rationalism has a clear understanding of the limitations of human reason and opposes any form of abuse of reason.This tradition holds that individual rationality can only be developed and function successfully within the framework of cumulative evolution, that is, individual rationality is subject to specific social life processes.

在自由主义经济思潮发展的谱系中，较早的有李斯特、凯恩斯、托宾和斯蒂格里茨等代表人物；在过去的3个世纪里分别有3个重要的代表人物：18世纪的斯密、19世纪的门格尔和20世纪的哈耶克。

The Theory of Monopoly Advantage: A Challenge to Traditional Theories

The Coca-Cola Company was born in the most open United States in the world.The Coca-Cola Company is also one of the most open companies in the world, with partners all over the world.However, the secret recipe that the Coca-Cola Company relies on for survival is kept in a well-known safe place. Only a few people in the company know this secret recipe, and others, even the closest people of these few insiders, don’t know it, let alone all over the place. Many partners in the world.But the company has no partners to accuse it of injustice, and no one calls it a villain, but the number of partners is endless and multiplying day by day.

"Keeping secrets protects the market." Coca-Cola's mysterious formula has been kept as a top secret until now, which is actually a way to maintain a monopoly advantage.

After the 20s, American multinational corporations showed a trend of rapid development in full swing, and the limitations of profit differential theory were fully exposed, so a theory with strong explanatory power was urgently needed. In 50, American scholar Stephen Heimer took the lead in challenging traditional theories in his doctoral dissertation "Internationalization of Domestic Enterprises: A Study of Foreign Direct Investment" completed by the Massachusetts Institute of Technology, and put forward the theory of monopoly advantage for the first time.C. P. Kindelberger of the Massachusetts Institute of Technology supplemented and developed the monopoly advantage proposed by Haimer in the 1960s.The theory is sometimes referred to as the "Heimer-Kindleberger tradition" in view of the significant contributions made by both Heimer and Kindleberger to the theory.

In the 2009 Global Top 500 list, Sinopec and China Petroleum "Double Heroes" lead the way, with little difference on the list, ranking 9th and 13th respectively.In contrast, the distribution of China's three major telecom operators on the list is not too concentrated. Among them, China Mobile ranks 99th; China Telecom ranks 263rd; and China Unicom ranks 419th.China Mobile is powerful because of its monopoly and firmly holds the initiative in market competition.Compared with Sinopec, at least there is PetroChina, an opponent whose strength is not much different from it, to check and balance.In the telecommunications industry, China Mobile occupies an absolute monopoly position, and other operators cannot compete with it in terms of capital, scale, income, and profits.

Stephen Hymer believes that the motivation of multinational corporations to make direct investment comes from the market defect, that is, the market is not complete.First, firms in different countries often compete with each other, but market imperfections mean that some firms are in monopoly or oligopoly positions.Therefore, it is possible for these companies to profit by simultaneously owning and controlling multiple businesses.Secondly, in the same industry, different companies have different operating capabilities. When a company has an advantage in producing a certain product, it will naturally find ways to maximize it.Both aspects illustrate the possibility of the emergence of multinational corporations and direct investment.Heimer further pointed out that from the perspective of eliminating market obstacles in the host country, the advantages of multinational companies have a compensating effect, that is, they are at least enough to offset the advantages of local companies in the host country.

Highmore's mentor, Kindleberger, went a step further, listing various possible compensation advantages, such as trademarks, marketing techniques, patented and know-how, access to financing, management skills, and economies of scale.The theory of monopoly advantage theoretically created a new research field with international direct investment as its object, making the theoretical research of international direct investment an independent subject.This theory not only explains the horizontal investment of multinational corporations in order to exert their monopoly advantages in a wider range, but also explains the vertical transfer of some processes, especially labor-intensive processes, to foreign countries in order to maintain their monopoly position. Therefore, it has a great influence on the development of the theory of foreign direct investment of multinational corporations.

The monopoly advantage owned by the enterprise is the decisive factor of the foreign direct investment of the enterprise.Kindelberger listed in detail the various monopoly advantages of investing in overseas companies.These advantages can be grouped into four categories:

(1) Incomplete advantages from the product market, such as product differences, trademarks, sales techniques, and price manipulation.

(2) Incomplete advantages from the factor market, including patents and industrial know-how, preferential conditions for obtaining funds, management skills, raw material advantages, etc.Patents and proprietary technologies can differentiate the company's products from similar products, thereby gaining the ability to control prices and sales volume, and at the same time restrict the entry of competitors and maintain the company's monopoly position.

(3) Internal economies of scale and external economies of scale owned by the enterprise.Through horizontal or vertical integration, multinational companies can obtain production scales that local companies cannot achieve, thereby reducing costs.

(4) Enterprise advantages due to government intervention, especially restrictions on market entry and output.

(End of this chapter)