In economics Economics is the social science that studies the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)". Current economic, a government-granted monopoly (also called a "de jure monopoly") is a form of coercive monopoly In economics and business ethics, a coercive monopoly is a business concern that prohibits competitors from entering the field, with the natural result being that the firm is able to make pricing and production decisions independent of competitive forces. A coercive monopoly is not merely a sole supplier of a particular kind of good or service , by which a government grants exclusive privilege to a private individual or firm to be the sole provider of a good or service; potential competitors are excluded from the market by law Law is a system of rules, usually enforced through a set of institutions. It shapes politics, economics and society in numerous ways and serves as a primary social mediator in relations between people. Contract law regulates everything from buying a bus ticket to trading on derivatives markets. Property law defines rights and obligations related, regulation Regulation refers to "controlling human or societal behaviour by rules or restrictions." Regulation can take many forms: legal restrictions promulgated by a government authority, self-regulation, social regulation , co-regulation and market regulation. One can consider regulation as actions of conduct imposing sanctions (such as a fine), or other mechanisms of government enforcement. As a form of coercive monopoly In economics and business ethics, a coercive monopoly is a business concern that prohibits competitors from entering the field, with the natural result being that the firm is able to make pricing and production decisions independent of competitive forces. A coercive monopoly is not merely a sole supplier of a particular kind of good or service ,, government-granted monopoly is contrasted with a non-coercive monopoly or an efficiency monopoly, where there is no competition but it is not forcibly excluded. Amongst forms of coercive monopoly it is distinguished from government monopoly In economics, a government monopoly is a form of coercive monopoly in which a government agency is the sole provider of a particular good or service and competition is prohibited by law. It is a monopoly created by the government. It is usually distinguished from a government-granted monopoly, where the government grants a monopoly to a private or state monopoly In economics, a government monopoly is a form of coercive monopoly in which a government agency is the sole provider of a particular good or service and competition is prohibited by law. It is a monopoly created by the government. It is usually distinguished from a government-granted monopoly, where the government grants a monopoly to a private (in which government agencies hold the legally-enforced monopoly rather than private individuals or firms) and from government-sponsored cartels (in which the government forces several independent producers to partially coordinate their decisions through a centralized organization). Advocates for government-granted monopolies often claim that they ensure public control over essential industries; opponents often criticize them as political favors to corporations A corporation is a legal entity separate from the persons that own it. In British tradition it is the term designating a body corporate, where it can be either a corporation sole or a corporation aggregate (involving more persons). In American and, increasingly, international usage, the term denotes a body corporate formed to conduct business, and and as distortions of the free market A free market is a transaction mechanism that economists use to describe a market which is free from government intervention . Within the ideal free market, property rights are voluntarily exchanged at a price arranged solely by the mutual consent of sellers and buyers. By definition, buyers and sellers do not coerce each other, in the sense that.

Under mercantilist Mercantilism is an economic theory that holds that the prosperity of a nation is dependent upon its supply of capital, and that the global volume of international trade is "unchangeable." Economic assets or capital, are represented by bullion held by the state, which is best increased through a positive balance of trade with other economic systems, European governments with colonial interests often granted large and extremely lucrative monopolies to companies trading in particular regions, such as the Dutch East India Company The Dutch East India Company was a trading company, which was established in 1602, when the States-General of the Netherlands granted it a 21-year monopoly to carry out colonial activities in Asia. It was the first multinational corporation in the world and the first company to issue stock. It was also arguably the world's first megacorporation,. Today, government-granted monopolies may be found in public utility services such as public roads The term was also commonly used to refer to roadsteads, waterways that lent themselves to use by shipping. Notable examples being Hampton Roads, in Virginia, the seaway Barry Roads in the Bristol Channel and Castle Roads, in Bermuda, mail Mail, or post, is a method for transmitting information and tangible objects, wherein written documents, typically enclosed in envelopes and also small packages are delivered to destinations around the world. Anything sent through the postal system is called mail or post, water supply Water supply is the process of self-provision or provision by third parties in the water industry, commonly a public utility, of water resources of various qualities to different users. Irrigation is covered separately, and electric power Electric power is defined as the rate at which electrical energy is transferred by an electric circuit. The SI unit of power is the watt, as well as certain specialized and highly-regulated fields such as education Education in its broadest sense is any act or experience that has a formative effect on the mind, character, or physical ability of an individual ; and in its technical sense education is the process by which society deliberately transmits its accumulated knowledge, values, and skills from one generation to another through institutions. Teachers and gambling Gambling is the wagering of money or something of material value on an event with an uncertain outcome with the primary intent of winning additional money and/or material goods. Typically, the outcome of the wager is evident within a short period. In many countries lucrative natural resources industries, especially the petroleum Petroleum or crude oil is a naturally occurring, flammable liquid found in rock formations in the Earth consisting of a complex mixture of hydrocarbons of various molecular weights, plus other organic compounds industry, are controlled by government-granted monopolies. Franchisess granted by governments to operate public transit Public transport comprises passenger transportation services which are available for use by the general public, as opposed to modes for private use such as automobiles or vehicles for hire. Some services are free though most charge some sort of fare through public roads are another example.

Contents

Intellectual property protection

Main article: Intellectual property Intellectual property are legal property rights over creations of the mind, both artistic and commercial, and the corresponding fields of law. Under intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; ideas, discoveries and inventions; and words,

Many commentators have also pointed out that what are sometimes called intellectual property Intellectual property are legal property rights over creations of the mind, both artistic and commercial, and the corresponding fields of law. Under intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; ideas, discoveries and inventions; and words, laws—laws granting protections through copyrights Copyright gives the author of an original work exclusive right for a certain time period in relation to that work, including its publication, distribution and adaptation, after which time the work is said to enter the public domain. Copyright applies to any expressible form of an idea or information that is substantive and discrete and fixed in a, patents A patent is a set of exclusive rights granted by a state to an inventor or his assignee for a limited period of time in exchange for a disclosure of an invention, and trademarks A trademark or trade mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or services from those of other entities—represent government-granted monopolies on the copying and use of particular items of information. It's worth noting, though, that intellectual property restrictions are usually motivated by concerns different from—indeed, opposite to—those that motivate other government-granted monopolies. Whereas other government-granted monopolies are usually motivated by a perceived need for greater public control over the accessibility and quality of essential goods and services, "intellectual property" monopolies are usually motivated by a perceived need for greater private control, by an artist or inventor, over the use and profits from their work. Similarly, whereas most other government-granted monopolies are accompanied with extensive regulations Regulation refers to "controlling human or societal behaviour by rules or restrictions." Regulation can take many forms: legal restrictions promulgated by a government authority, self-regulation, social regulation , co-regulation and market regulation. One can consider regulation as actions of conduct imposing sanctions (such as a fine) intended to prevent the taking of monopoly profits In economics, a firm is said to reap monopoly profits when a lack of viable market competition allows it to set its prices above the equilibrium price for a good or service without losing profits to competitors. Monopoly profit is a type of economic profit, that is, it is a profit greater than the normal profit that is typical in a perfectly by the monopolist, "intellectual property" monopolies are usually granted with the express purpose that artists and inventors will reap monopoly profits In economics, a firm is said to reap monopoly profits when a lack of viable market competition allows it to set its prices above the equilibrium price for a good or service without losing profits to competitors. Monopoly profit is a type of economic profit, that is, it is a profit greater than the normal profit that is typical in a perfectly from their work, giving them a greater incentive to persist in creative work, and preventing low-cost unauthorized copies from driving them out of the market.

However, governments have granted monopolies to forms of copy prevention. In the Digital Millennium Copyright Act The Digital Millennium Copyright Act is a United States copyright law that implements two 1996 treaties of the World Intellectual Property Organization (WIPO). It criminalizes production and dissemination of technology, devices, or services intended to circumvent measures (commonly known as Digital Rights Management or DRM) that control access to, for example, the proprietary Macrovision Macrovision Corporation is a globally-operating, U.S.-based company that develops and markets licensing, access control, and secure distribution technologies for electronically delivered creative works. This includes digital media , web publishing (text, images), and computer software (consumer software, enterprise software, and video games). The copy prevention technology is required for analog video recorders. Though other forms of copy prevention aren't prohibited, requiring Macrovision effectively gives it a monopoly and prevents more effective copy prevention methods from being developed.

Criticism

Opponents of government-granted monopoly often point out that such a firm is able to set its pricing and production policies without fear of breeding potential competition. They argue that this causes inefficiencies in the market place, such as unnecessarily high prices to consumers for the good or service being supplied (government-imposed price caps might avert this problem, however, it is still possible that competition would supply the good or service at a lower price). One historical example of this is the government-granted monopoly in steamboat traffic operated by Robert Fulton Robert Fulton was an American engineer and inventor who is widely credited with developing the first commercially successful steamboat. He also designed a new type of steam warship. In 1800 he was commissioned by Napoleon Bonaparte to design the Nautilus, which was the first practical submarine in history. The New York legislature granted Fulton the privilege to be the sole provider of all steamboat traffic for thirty years. Competition was forbidden by law. Thomas Gibbons Thomas J. Gibbons , was the Philadelphia Police Department Commissioner appointed by Mayor Joseph S. Clark Jr. in 1952 and retired in 1960. He was described as "incorruptible" and a "lone wolf" for his intense efforts against the La Cosa Nostra, specifically Angelo Bruno, and the corrupt police officers who supported it, a steamboat entrepreneur, hired Cornelius Vanderbilt Cornelius Vanderbilt , also known by the sobriquet Commodore, was an American entrepreneur who built his wealth in shipping and railroads and was the patriarch of the Vanderbilt family to ferry passengers for a cheaper fare in defiance of the law in an attempt to compete with Fulton for about six months. In 1824, in Gibbons v. Ogden Gibbons v. Ogden, 22 U.S. 1 , was a case in which the Supreme Court of the United States held that the power to regulate interstate commerce was granted to Congress by the Commerce Clause of the Constitution. The case was argued by some of America's most admired and capable attorneys at the time. Exiled Irish patriot Thomas Addis Emmet and Thomas, the Supreme Court struck down Fulton's government-granted monopoly ruling that states cannot legally regulate interstate commerce. Steamboat fares almost immediately dropped from seven to three dollars after the decision and traffic increased dramatically. Fulton was unable to successfully compete with the low fares offered by Gibbons and Vanderbilt, which resulted in his bankruptcy. (The Myth of the Robber Barrons, by Burton W. Folsom Jr.)

"Intellectual property" monopolies - particularly copyright - inflate the cost of a work from its marginal cost of production (currently about $0 to copy a file) - to a much higher price. This reduces the aggregate utility In economics, utility is a measure of the relative satisfaction from, or desirability of, consumption of various goods and services. Given this measure, one may speak meaningfully of increasing or decreasing utility, and thereby explain economic behavior in terms of attempts to increase one's utility. For illustrative purposes, changes in utility substantially. It has been argued that this is necessary to incentivize artistic creation however several counter arguments are often made :

(1) Many great works of literature Literature is the art of written works. Literally translated, the word means "acquaintance with letters" , and therefore the academic study of literature is known as Letters (as in the phrase "Arts and Letters"). In Western culture the most basic written literary types include fiction and nonfiction and music Music is an art form whose medium is sound organized in time. Common elements of music are pitch , rhythm (and its associated concepts tempo, meter, and articulation), dynamics, and the sonic qualities of timbre and texture. The word derives from Greek μουσική (mousike), "(art) of the Muses" were created before copyright protection. Many classical composers were far more prolific than there modern counterparts (for example : Handel George Frideric Handel was a German-English Baroque composer, who is famous for his operas, oratorios, and concerti grossi. His life and music may justly be described as "cosmopolitan": he was born in Germany, trained in Italy, and spent most of his life in England. Born as Georg Friedrich Händel (pronounced [ˈhɛndəl]) in Halle in,Mozart Wolfgang Amadeus Mozart (German pronunciation: [ˈvɔlfɡaŋ amaˈdeus ˈmoːtsart], full name Johann Chrysostom Wolfgang Amadeus Mozart , was a prolific and influential composer of the Classical era. He composed over six hundred works, many acknowledged as pinnacles of symphonic, concertante, chamber, piano, operatic, and choral music. He is,Bach Johann Sebastian Bach (31 March 1685 [O.S. 21 March] – 28 July 1750) was a German composer and organist whose sacred and secular works for choir, orchestra, and solo instruments drew together the strands of the Baroque period and brought it to its ultimate maturity. Although he introduced no new forms, he enriched the prevailing German style). When you pay someone millions of dollars (or in some cases a billion dollars (Billy Joel William Martin "Billy" Joel is an American rock musician, singer-songwriter, and classical composer. He released his first hit song, "Piano Man", in 1973. According to the RIAA, Billy Joel is the sixth best-selling recording artist in the United States)) for their work, the incentivizing capacity of money to spur subsequent work decreases (due to decreasing marginal utility In economics, the marginal utility of a good or of a service is the utility of the specific use to which an agent would put a given increase in that good or service, or of the specific use that would be abandoned in response to a given decrease. In other words, marginal utility is the utility of the marginal use — which, on the assumption of). (This fact is also often overlooked in top executive compensation Executive compensation is how top executives of business corporations are paid. This includes a basic salary, bonuses, shares, options and other company benefits. Over the past three decades, executive compensation has risen dramatically beyond the rising levels of an average worker's wage. Executive compensation is an important part of corporate).

(2) The costs of manufacturing and distributing intellectual property has decreases (eg. Internet The Internet is a global system of interconnected computer networks that use the standardized Internet Protocol Suite . It is a network of networks that consists of millions of private and public, academic, business, and government networks of local to global scope that are linked by copper wires, fiber-optic cables, wireless connections, and), but the duration of copyright has - paradoxically - increased.

(3) Many actual producers of intellectual property are paid on salary or contract and have to sign over their rights as a pre-condition of employment or of a distribution contract. Many artists and scientists actually see very little of the rewards of their work - (for example, inventors of statins The statins are a class of drugs that lower cholesterol levels in people with or at risk of cardiovascular disease, PCR In molecular biology, the polymerase chain reaction is a technique to amplify a single or few copies of a piece of DNA across several orders of magnitude, generating millions or more copies of a particular DNA sequence. The method relies on thermal cycling, consisting of cycles of repeated heating and cooling of the reaction for DNA melting and, transistors In electronics, a transistor is a semiconductor device commonly used to amplify or switch electronic signals. A transistor is made of a solid piece of a semiconductor material, with at least three terminals for connection to an external circuit. A voltage or current applied to one pair of the transistor's terminals changes the current flowing, intergrated circuits (Jack Kilby Jack St. Clair Kilby was a Nobel Prize laureate in physics in 2000 for his invention of the integrated circuit in 1958 while working at Texas Instruments (TI). He is also the inventor of the handheld calculator and thermal printer), windows (Xerox Parc PARC , formerly Xerox PARC, is a research and development company in Palo Alto, California with a distinguished reputation for its contributions to information technology), to name a few). The benefits accrue instead over many years to the corporations A corporation is a legal entity separate from the persons that own it. In British tradition it is the term designating a body corporate, where it can be either a corporation sole or a corporation aggregate (involving more persons). In American and, increasingly, international usage, the term denotes a body corporate formed to conduct business, and who hired or contracted with them. People early in their careers are often in a position of negotiation Negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests. It is the primary method of alternative dispute resolution weakness and are near an absorbing state of having little money so they cannot haggle well. They also have difficulty signaling to the markets the value of their ideas and therefore face a classic asymmetric information / "market for lemons" problem.

(4) Intellectual property can serve as a strong deterrent to freedom of artistic expression, and a barrier to entry. Someone who wishes to use allusion or create works that refer to or derive from other pre-existing works in their culture - better first be able to hire themselves a lawyer. Since copyright now tends to last longer than most nations, artistic works from one's culture almost never effectively enter the public domain anymore. (The eventual expansion of the public domain has been one traditional argument in favor of such monopolies).

5) There are numerous examples which demonstrate that people do not need monetary incentive to create and share intellectual or artistic works (eg. Wikipedia,MySpace,WorldWideWeb,Internet). Plenty of work gets created and shared for free - creative people who can create and have the resources to do so often enjoy developing and sharing their creations.

6) Granting excessive monopolies can also distort incentives - inefficiently drawing excessive people and resources into an area. Their human capital and financial capital are then less available for other important areas that may be underprovided - for example housing,infrastructure,food,medical care. The subsidy provided by the extension of copyright - dwarfs the magnitude of farm subsidies or many other common forms of welfare or charity. In a free market, the cost of COPIES of existing work would be at their marginal cost of production - which is currently approximately zero.

7) Intellectual property monopolies can lead to severe price discrimination. A poor person in the United States, for example, might pay significantly more for the same textbook, software program or medication than a wealthy person in another country where the same goods are often sold for a fraction of the price. Reimportation is often difficult or even prohibited.

8) Much of the work of corporate promoters of intellectual property is focused on gaining market share,brand recognition or focality (cf. Thomas Schelling). Resources spent promoting existing program libraries shout down new artists, and in-general provide little Pareto improvement to the economy, since time spent listening, watching or reading well promoted copyrighted works generally substitutes for time spent experiencing new work or work in the public domain.

Examples

See also

External links

Categories: Market failure | Monopoly (economics)

 

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