WEBVTT NOTE The Fear of Monopoly - Part Two 1 00:00:00.000 --> 00:00:03.000 THE FEAR OF MONOPOLY PART II 2 00:00:04.000 --> 00:00:22.000 Considering the area of monopoly and competition, the question before us relates to whether or not a free market tends to create competitive factors or whether it will inevitably drift toward the rigidity found in a monopoly. 3 00:00:22.000 --> 00:00:29.320 It will be my contention that, given a free market, the various factors that will appear 4 00:00:29.320 --> 00:00:36.580 will automatically tend to encourage competition, and that if we have a free market, in fact, 5 00:00:36.580 --> 00:00:42.440 that is, there is no government intervention for any purpose, either to impede or to assist, 6 00:00:42.440 --> 00:00:48.600 that the tendency will be to eliminate monopoly, or at least harmful monopoly, and will constantly 7 00:00:48.600 --> 00:01:01.040 In addition to price and quality, which are two very basic items in competition, assuming 8 00:01:01.040 --> 00:01:07.360 a free market, there are four other areas that are competitive that I want to examine 9 00:01:07.360 --> 00:01:17.040 each in turn. These are direct competition, parallel competition, dollar competition and 10 00:01:17.040 --> 00:01:25.560 market competition. What we call direct competition is an area of competition which in point of 11 00:01:25.560 --> 00:01:32.760 fact even the government recognizes as existing. That is, it exists from time to time. Wherever 12 00:01:32.760 --> 00:01:41.640 we have two or more entrepreneurs, businessmen, industrialists engaged in providing what is 13 00:01:41.640 --> 00:01:47.320 is essentially the same good or service we have an instance of direct competition. That 14 00:01:47.320 --> 00:01:55.200 is, if we have two or more steel companies manufacturing steel, two or more airlines serving 15 00:01:55.200 --> 00:02:04.400 the same cities, two or more drugstores covering virtually the same retail territory, two or 16 00:02:04.400 --> 00:02:34.400 For example, if you have, let us say, two textile mills, owned by two 17 00:02:34.400 --> 00:02:49.400 are two different firms. They will vary their weaves. They will vary their patterns. They will do whatever they can to introduce variations that will make what they are doing better than what their competitor is doing. 18 00:02:49.400 --> 00:02:57.400 But nonetheless, we call it direct. Even though it isn't precisely direct, it is direct enough so that we call it direct. 19 00:02:57.400 --> 00:03:03.400 Another example would be, say, two motion picture exhibition houses, two moving picture theaters. 20 00:03:03.400 --> 00:03:11.120 Theaters. Obviously they will be showing different films. It would be absolute direct competition 21 00:03:11.120 --> 00:03:17.600 if two moving picture theaters, side by side, both opened up to show exactly the same picture. 22 00:03:17.600 --> 00:03:23.680 Well then you would have really direct competition. But I don't recall ever having seen that. 23 00:03:23.680 --> 00:03:29.520 Everybody varies it as much as they can. Just as two television stations, although we say 24 00:03:29.520 --> 00:03:34.960 They are in direct competition. They certainly will have different programming, and two newspapers 25 00:03:34.960 --> 00:03:41.600 will do what they can to vary the content and the presentation that they make. Nonetheless, 26 00:03:41.600 --> 00:03:48.580 we call these instances of direct competition, and the argument is that if you do not have 27 00:03:48.580 --> 00:03:52.440 a direct competitor, then there is a monopoly there. 28 00:03:52.440 --> 00:03:58.660 Now, this is the only place where I am going to make a concession. Assuming a free market, 29 00:03:58.660 --> 00:04:06.080 is possible for there to be, under certain conditions, the absence of a direct competitor. 30 00:04:06.080 --> 00:04:09.480 That is absolutely a possibility in a free market. 31 00:04:09.480 --> 00:04:15.880 For example, in fact, there are two ways that such a monopoly could occur given a free market. 32 00:04:15.880 --> 00:04:20.400 When a new product is developed and introduced for the first time, obviously there is no 33 00:04:20.400 --> 00:04:23.340 direct competitor because it is a brand new idea. 34 00:04:23.340 --> 00:04:29.100 How can there be a competitor to my widget when I am the fellow that invented the widget? 35 00:04:29.100 --> 00:04:35.580 Clearly there isn't one. So obviously, when a new product is introduced, there is no direct 36 00:04:35.580 --> 00:04:45.460 competitor. Also, a direct competitor might be eliminated under the following condition. 37 00:04:45.460 --> 00:04:52.360 Let us suppose that we have an entrepreneur who is so efficient, so good, so much better 38 00:04:52.360 --> 00:05:00.680 that he is able to underprice his competition. Ultimately, he puts them out of business because 39 00:05:00.680 --> 00:05:06.040 he is so much better than they are. In fact, he continues to operate this way. He is so 40 00:05:06.040 --> 00:05:11.120 good and he keeps his quality so high that no one can touch him, and he keeps his price 41 00:05:11.120 --> 00:05:17.340 so low that no one can get in there. He could get into a position of operating without a 42 00:05:17.340 --> 00:05:24.060 Direct Competitor. That's true. So if that has been your fear that a free market could 43 00:05:24.060 --> 00:05:29.940 introduce a case where there is no direct competitor, your fear is justified. That can 44 00:05:29.940 --> 00:05:33.540 happen in a free market. But now I'm going to tell you it doesn't make any difference 45 00:05:33.540 --> 00:05:40.980 if it does or not, because the direct area of competition is the least important. Now 46 00:05:40.980 --> 00:05:45.800 that may come as a shock, but actually it is. It's very insignificant. Assuming you 47 00:05:45.800 --> 00:05:55.480 Assuming you have a free market, whether or not you have a direct competitor at a given 48 00:05:55.480 --> 00:06:01.480 moment is actually inconsequential. Let me go on to try to establish that as I make a 49 00:06:01.480 --> 00:06:04.120 few more points first. 50 00:06:04.120 --> 00:06:10.640 Let me take parallel competition next. Parallel competition is that type of competition that 51 00:06:10.640 --> 00:06:27.200 is a competition between firms or industries that are in essence doing the same thing. 52 00:06:27.200 --> 00:06:36.200 Now we have product competition. We have competition, for example, between airlines and bus lines. 53 00:06:36.200 --> 00:06:42.300 Now, that's not the same. You have different bus lines competing directly. You have different 54 00:06:42.300 --> 00:06:49.260 airlines competing directly. But there is also competition between airlines and bus lines, 55 00:06:49.260 --> 00:06:57.100 and they're doing quite a different thing. And yet, the end result is an ultimate product 56 00:06:57.100 --> 00:07:05.160 that is similar in each case. I could leave from this city and go to another city either 57 00:07:05.160 --> 00:07:10.960 by Bus or by Plane. If I go by bus, I have the choice of two or three bus lines. If I 58 00:07:10.960 --> 00:07:17.040 go by plane, I have the choice of several airlines. But whether I go by plane or bus 59 00:07:17.040 --> 00:07:23.960 is a decision that throws me into one area or another, and that is called parallel competition. 60 00:07:23.960 --> 00:07:28.360 In this particular case, let me show you the ramifications of it. For instance, it would 61 00:07:28.360 --> 00:07:34.520 be clear that if you have a newspaper and the newspaper is competing with another newspaper, 62 00:07:34.520 --> 00:07:40.040 You have newspaper competition, but have you ever stopped to consider the fantastic competition 63 00:07:40.040 --> 00:07:47.840 between a newspaper and a television station? Really, having been in both areas of endeavor, 64 00:07:47.840 --> 00:07:54.280 I can assure you that as a newspaperman I would rather face another newspaper than a 65 00:07:54.280 --> 00:08:00.960 television station. I think I could compete on a pretty good basis with another newspaper, 66 00:08:00.960 --> 00:08:06.640 But the television station can do things I can't do as a newspaperman. And conversely, 67 00:08:06.640 --> 00:08:12.020 if I'm in television, I would rather face another television station than to face a newspaper. 68 00:08:12.020 --> 00:08:18.280 The newspaper can do things that I can't do. But the fact is they are competitors, 69 00:08:18.280 --> 00:08:24.960 they are parallel competitors. The same advertisers are putting their money into television commercials 70 00:08:24.960 --> 00:08:31.320 or into newspaper ads. And the same advertiser hasn't got a limitless number of dollars 71 00:08:31.320 --> 00:08:36.600 to work with, so he buys the one rather than the other, or he spends more one place than 72 00:08:36.600 --> 00:08:42.480 the other. And that certainly is competition. Additionally, we have found very few people 73 00:08:42.480 --> 00:08:47.880 who read the newspaper while they're watching television, and vice versa. So if you've 74 00:08:47.880 --> 00:08:51.880 got people who are going to be staring at their television sets, there really isn't 75 00:08:51.880 --> 00:08:58.880 of Money, The Theory of Money and State, The Theory of Money and State, The Theory of Money 76 00:09:21.880 --> 00:09:26.840 Company. There wouldn't be any competition. Oh, no. How about all the other metals that 77 00:09:26.840 --> 00:09:35.040 we can make things with, besides steel? Copper, brass, aluminum, tin, iron. How about the 78 00:09:35.040 --> 00:09:40.720 plastics? Are you aware, for example, that right now in the automotive line we are beginning 79 00:09:40.720 --> 00:09:47.360 to make automobile fenders out of spun glass, which is a type of plastic? It's lighter. 80 00:09:47.360 --> 00:09:51.720 It's very durable. It's a very good substance. How do you think the steel people feel about 81 00:09:51.720 --> 00:09:56.960 about that. That's competition. That's parallel competition. And I can assure you 82 00:09:56.960 --> 00:10:05.080 that parallel competition is often far more rugged, far more keen, far more merciless 83 00:10:05.080 --> 00:10:10.080 than direct competition. You see, when you're facing a direct competitor, he can't do 84 00:10:10.080 --> 00:10:14.640 anything you can't do. And you can't do anything he can't either. The question is 85 00:10:14.640 --> 00:10:20.680 which one of you is smarter, better, more efficient? But when you face a parallel competitor, 86 00:10:20.680 --> 00:10:26.520 He can do things you can't do, and now you have a problem, and to overcome that will 87 00:10:26.520 --> 00:10:32.240 take a great deal indeed. 88 00:10:32.240 --> 00:10:35.320 Those are instances of parallel competition. 89 00:10:35.320 --> 00:10:40.680 There are some people who, of course, contend that there are certain areas where you have 90 00:10:40.680 --> 00:10:42.840 natural monopolies. 91 00:10:42.840 --> 00:10:48.840 That is, there are areas where there isn't any competition. 92 00:10:48.840 --> 00:10:55.360 This occurs in the minds of people, at least, when we're talking in terms of utility sometimes. 93 00:10:55.360 --> 00:11:02.200 They say, well, electricity is a natural monopoly. You don't want more than one firm handling 94 00:11:02.200 --> 00:11:07.660 or supplying electricity because it would be inefficient. In actual fact, I'd like 95 00:11:07.660 --> 00:11:13.960 to suggest that that's not true. You see, of course, electricity is a special type of 96 00:11:13.960 --> 00:11:22.400 of Service, a special type of energy. But we do have different ways of getting it. That 97 00:11:22.400 --> 00:11:28.120 is, assuming a free market. And some of the ways that we're not using to get electricity 98 00:11:28.120 --> 00:11:33.080 might be far more efficient than what we have. The general idea in this country has been 99 00:11:33.080 --> 00:11:38.600 it becomes more efficient as we centralize it. Well now, wait a minute. We've had some 100 00:11:38.600 --> 00:11:46.000 Some fantastic blackouts because of centralization of electricity. Suppose instead we opened up 101 00:11:46.000 --> 00:11:51.880 the market, the government no longer granted exclusive franchises to electric companies 102 00:11:51.880 --> 00:11:57.600 and no longer got in to compete in this area by supplying electric current itself, supposing 103 00:11:57.600 --> 00:12:04.240 instead we open up the field and we have the opportunity of improving the home generator. 104 00:12:04.240 --> 00:12:10.000 The home generator, if we were to put that in a lab and begin experimenting with it and 105 00:12:10.000 --> 00:12:15.420 coming up with ways of supplying fuel to it that are efficient, including the utilization 106 00:12:15.420 --> 00:12:23.240 of the rays of the sun, can conceivably become so good that when we build a new home we would 107 00:12:23.240 --> 00:12:29.360 build it with a home generator and supply the fuel, and the generator and the supply 108 00:12:59.360 --> 00:13:12.380 And we can't compete. It's not that the market wouldn't let us compete. It is that the government 109 00:13:12.380 --> 00:13:16.460 has preempted us from getting into this area. And then think of the other things that we 110 00:13:16.460 --> 00:13:21.000 could do in addition to using electricity. I don't know that electricity is necessarily 111 00:13:21.000 --> 00:13:26.980 the answer. I might point out that today there is a very, very good competitor even to the 112 00:13:26.980 --> 00:13:31.280 The Municipal Electric Plant, and that's the municipal gas company. There are lots 113 00:13:31.280 --> 00:13:35.820 of things that you can do with either gas or electricity. But you could also do them 114 00:13:35.820 --> 00:13:42.780 with gasoline or kerosene or maybe with atomic energy or possibly with other types of energy 115 00:13:42.780 --> 00:13:47.780 that we can get hold of. There are all kinds of competing factors if we'll open up the 116 00:13:47.780 --> 00:13:53.640 market and let these factors compete. So as far as there being natural monopolies are 117 00:13:53.640 --> 00:14:14.640 I would challenge that. Perhaps there are some. I don't know what they would be. Of course there is the idea that we all need water, and I would agree we certainly do need water. Here is a basic human necessity, but I'm not so certain that it has to be supplied by a municipal company. 118 00:14:14.640 --> 00:14:22.480 In fact, I notice that whatever is supplied in the way of a public good, that's the 119 00:14:22.480 --> 00:14:28.280 place where most of the pollution comes. The difficulties that we have today with our ecology 120 00:14:28.280 --> 00:14:34.040 are not in the areas that are privately owned. They're in the areas that are quote and unquote 121 00:14:34.040 --> 00:14:40.080 pro bono publico. They are for the public. Where do you get your problems? On public 122 00:14:40.080 --> 00:14:49.500 Beaches, with oil slicks, in public water supplies, the public air, the public highways, 123 00:14:49.500 --> 00:14:55.580 these are the areas that are polluted, of course, because they are not being managed 124 00:14:55.580 --> 00:15:01.800 the way owners would manage them. And consequently you have pollution, you do not have efficient 125 00:15:01.800 --> 00:15:08.700 management and you don't have the competitive factors at work. If you will put these things 126 00:15:08.700 --> 00:15:14.500 in the Market, and let the government get out of the area, then we may discover that 127 00:15:14.500 --> 00:15:18.540 there are still better ways of doing things than we yet have dreamed of. 128 00:15:18.540 --> 00:15:23.380 I'm thinking, for example, of the telephone company. We're told that that is a natural 129 00:15:23.380 --> 00:15:27.420 monotony. I'm not so sure. 130 00:15:27.420 --> 00:15:33.980 I once had this happen to me. It was years ago. A man came into my office, and he put 131 00:15:33.980 --> 00:15:39.520 Put a telephone down on my desk. It was just the instrument itself, the cradle phone and 132 00:15:39.520 --> 00:15:44.700 the base with the dial there. That's all. There were no wires leading out from it, nothing 133 00:15:44.700 --> 00:15:50.660 else. He put it down on my desk and said, Call your wife. I thought he was joking, because 134 00:15:50.660 --> 00:15:55.880 obviously the phone was not attached to anything. So I laughed. I said, Oh, sure, the phone 135 00:15:55.880 --> 00:16:02.380 isn't connected. He said, No, I'm not kidding. Call your wife. Well, I thought I'll go along 136 00:16:02.380 --> 00:16:07.180 along with the gags. So I picked up the receiver. There was a dial tone. I picked up the phone, 137 00:16:07.180 --> 00:16:11.420 you know. It's not connected to anything. I said, how do you do that? He said, call 138 00:16:11.420 --> 00:16:16.140 your wife. I said, okay. So I dialed a number. I got her. I said, honey, I'm talking to 139 00:16:16.140 --> 00:16:19.380 you on a phone that isn't connected. She said, why don't you be home for supper? 140 00:16:19.380 --> 00:16:24.980 I said, you know, never mind. But I said, how do you do it? He says, easy, short wave. 141 00:16:24.980 --> 00:16:31.940 Now there is a kind of installation of phone that I had in my hand in the 1930s. 142 00:16:31.940 --> 00:16:37.700 The firm that was putting this together had realized that it's a perfectly simple thing 143 00:16:37.700 --> 00:16:43.400 to have telephonic communication over short distances by means of short wave. 144 00:16:43.400 --> 00:16:47.960 And all you have to do is to have a central operator, which we had, and they had worked 145 00:16:47.960 --> 00:16:53.260 out temporarily a deal with the telephone company for this experiment, you see. 146 00:16:53.260 --> 00:16:59.020 And what happened when I dialed, it activated the central switchboard the same as if I had 147 00:16:59.020 --> 00:17:05.520 been connected to it by a line, and so I got through the same way as I would anyway, now 148 00:17:05.520 --> 00:17:06.860 with lines. 149 00:17:06.860 --> 00:17:12.920 In other words, back in the 1930s we had a way of telephonic communication that could 150 00:17:12.920 --> 00:17:17.260 have eliminated the telephone wires. 151 00:17:17.260 --> 00:17:18.600 We didn't really need them. 152 00:17:18.600 --> 00:17:20.320 We don't need them now. 153 00:17:20.320 --> 00:17:28.440 But you can't find that out because this is an area that is protected by a government 154 00:17:28.440 --> 00:17:32.920 franchise that grants an exclusive monopoly to one firm or another, you see. 155 00:17:32.920 --> 00:17:39.880 So actually today, for example, just continuing on the telephone thing, most people feel that 156 00:17:39.880 --> 00:17:42.280 we only have one telephone company in the country. 157 00:17:42.280 --> 00:17:48.480 Actually, there are about 2,000 telephone companies in the country and the way they've 158 00:17:48.480 --> 00:18:06.480 The telephone is a very beautiful thing. If I pick up the telephone on the West Coast, I can call anybody on the East Coast and my voice will perhaps go through equipment that is controlled by 10, 20, 30 different companies. 159 00:18:06.480 --> 00:18:16.480 Each company gets a pro rata share of the price that I pay for the service and it is taken care of and all works out. So this can be done. 160 00:18:16.480 --> 00:18:21.320 I am not so sure that the telephone is the best means of communication, with or without 161 00:18:21.320 --> 00:18:29.480 the lines. We may have other ways of communicating if we just have a free market. I am only concerned 162 00:18:29.480 --> 00:18:37.960 at the moment that you do recognize the fantastic efficacy, the fantastic creativity of a free 163 00:18:37.960 --> 00:18:43.880 market where people can innovate, they can come up with new things, and nobody is there 164 00:18:43.880 --> 00:18:47.840 to say, well, you can't make that because this other fellow is making something like 165 00:18:47.840 --> 00:18:52.880 it, and therefore you're out of business. Instead, we could have a fantastic number 166 00:18:52.880 --> 00:18:58.520 of new innovations coming along all the time, and, of course, probably most of them wouldn't 167 00:18:58.520 --> 00:19:03.360 be as good as what we've got. But here and there, somebody would crack through and come 168 00:19:03.360 --> 00:19:08.320 up with a real winner, and we could all have the benefit of that. But government is protecting 169 00:19:08.320 --> 00:19:13.320 us from these things. So we don't get the innovations. We tend to simply go along with 170 00:19:13.320 --> 00:19:22.720 Let's take dollar competition for a moment, a very important area of competition. Whenever 171 00:19:22.720 --> 00:19:29.640 we deal in the market today, in a modern market, we deal in terms of money. We translate goods 172 00:19:29.640 --> 00:19:34.360 and services that we have into money, and then we translate the money back into the 173 00:19:34.360 --> 00:19:40.880 goods or services we want to buy. Money is the medium of exchange. Because money is scarce 174 00:19:40.880 --> 00:19:48.720 and must be scarce or it wouldn't be valued, none of us have a limitless supply of money. 175 00:19:48.720 --> 00:19:54.240 The consequence is that at the dollar level we are engaged in competitive actions all 176 00:19:54.240 --> 00:20:00.640 the time. Let me give you an example of what I mean. Let's suppose I have to go to town 177 00:20:00.640 --> 00:20:09.960 for some reason, and I go there and complete my errands, and I was going to stop over at 178 00:20:09.960 --> 00:20:16.840 at the drugstore to pick up, say, some shaving cream that I want. But the drugstore is around 179 00:20:16.840 --> 00:20:21.280 the corner from where I am, and there's a phone booth where I am right now. So I think 180 00:20:21.280 --> 00:20:26.680 maybe my wife would like something. So I go into the phone booth, and I call her, and 181 00:20:26.680 --> 00:20:31.840 I say, honey, I'm down here at the market. Is there anything I could get for you while 182 00:20:31.840 --> 00:20:36.240 I'm here to save you a trip? And she says, gee, I'm glad you called. I want you to stop 183 00:20:36.240 --> 00:21:06.240 I stop over at the bakery and get a loaf of vitamin-enriched daisy bread. It's a special type of vitamin-enriched bread, and we'd like to have it. And I say, what's it cost? And she says, well, it's 75 cents. I say, well, fine, I've got that much left. I'll go and get the bread for you. So I do so. I go and I buy the bread, and then I count the change in my pocket. Now, the shaving cream I was going to buy cost 89 cents. But all I have left is 30 cents. And that means I don't buy the shaving cream. 184 00:21:06.240 --> 00:21:13.760 Does that mean that the baker who made the daisy bread is competing with the fellow who 185 00:21:13.760 --> 00:21:20.480 made the shaving cream? Yes, in terms of my ability to buy both. I haven't got the resources 186 00:21:20.480 --> 00:21:25.360 to buy both. I chose in favor of the bread, and that means I don't buy the shaving cream. 187 00:21:25.360 --> 00:21:30.320 Now that's my level. Now you take people with more money than I have, and they make 188 00:21:30.320 --> 00:21:35.600 decisions like this. A man goes out into the market and he decides this is the year for 189 00:21:35.600 --> 00:22:02.960 General Motors is competing with, say, Pan Am, through money, because we have a limited 190 00:22:02.960 --> 00:22:08.700 Supply of Money, and we can only spend each dollar once. So when we make up our minds 191 00:22:08.700 --> 00:22:13.840 that we're going to spend it for X product rather than Y product, we put those two products 192 00:22:13.840 --> 00:22:21.120 in competition. Whatever they are, they can be as diverse as bouquets of flowers, umbrellas, 193 00:22:21.120 --> 00:22:25.880 insurance policies, and fountain pens. It doesn't make any difference. I have so much 194 00:22:25.880 --> 00:22:31.300 money and that's all I have. And when I spend it, I don't have it anymore. So when I go 195 00:22:31.300 --> 00:22:40.300 I go to the market, I decide among a vast array of choices I could make to take choice A, B, and C, and I stop there because I'm out of money. 196 00:22:40.300 --> 00:22:46.300 And that means the choice D, E, F, G, H, and so on, ad infinitum, I just don't get. 197 00:22:46.300 --> 00:22:52.300 And that means that A, B, and C are competing with D, E, F, G, H, and so on ad infinitum. 198 00:22:52.300 --> 00:22:59.300 That's dollar competition. Does that occur in a free market? It sure does. It occurs everywhere. 199 00:22:59.300 --> 00:23:05.260 everywhere. This is why we buy ads, to encourage people to buy our product. What we are saying 200 00:23:05.260 --> 00:23:10.720 when we put an ad in the paper or we go on television or radio or however we advertise, 201 00:23:10.720 --> 00:23:17.320 we are saying, spend your money with us. Buy my widget. I don't care what else you do. 202 00:23:17.320 --> 00:23:20.860 Maybe you're going to go hungry, but buy my widget. Maybe you go without insurance, 203 00:23:20.860 --> 00:23:26.140 but buy my widget. Maybe you don't have a car, but buy my widget. Because we realize 204 00:23:26.140 --> 00:23:32.580 that we are competing for everybody's dollars. At the dollar level, we are in competition 205 00:23:32.580 --> 00:23:38.420 with everybody else who might receive dollars. And we want to get as many dollars coming 206 00:23:38.420 --> 00:23:45.220 our way as we can, and that's the kind of competition you will find given a free market. 207 00:23:45.220 --> 00:23:49.740 Because in a free market, each of us chooses where we will spend our dollars. And if we 208 00:23:49.740 --> 00:23:53.440 choose not to spend them, then they don't get spent. Or if we spend them one place, 209 00:23:53.440 --> 00:24:06.640 Market competition is the kind of competition that exists only in a free market. If you 210 00:24:06.640 --> 00:24:21.160 do not have a free market, this area ceases to be. Given a free market, anyone who wishes 211 00:24:21.160 --> 00:24:30.120 is to, at any time, may go into any business he cares to or may get out of any business 212 00:24:30.120 --> 00:24:36.520 that he is already in. In other words, free access, free entrance, free exit. 213 00:24:36.520 --> 00:24:42.860 What does that mean? Actually it means that direct competition isn't very important 214 00:24:42.860 --> 00:24:51.000 if you have a free market. Let us suppose that we have a case where we have an absence 215 00:24:51.000 --> 00:24:56.920 of a Direct Competitor. And this man is operating at a certain price level and at a certain 216 00:24:56.920 --> 00:25:06.960 level of quality. If this man does not keep his prices low or his quality high and we 217 00:25:06.960 --> 00:25:12.440 have a free market, it means that somebody else will come in and he will have a direct 218 00:25:12.440 --> 00:25:19.380 competitor in the morning. If he is protected, then he doesn't have to worry about where 219 00:25:19.380 --> 00:25:41.980 Put it in your own mind for a minute. Let's suppose that you wanted to be a grocer. You'd 220 00:25:41.980 --> 00:25:46.240 like to run a grocery store. Own one. You've got a little capital. You know where you can 221 00:25:46.240 --> 00:25:51.560 When you can raise some other capital, you'd like to have a good grocery business, a supermarket, 222 00:25:51.560 --> 00:25:56.080 where you can really do a job and make some money. That's what you'd like to do. 223 00:25:56.080 --> 00:26:01.360 Where will you locate? Will you try to locate next to a supermarket that's doing a thriving 224 00:26:01.360 --> 00:26:06.800 business that is well established, that knows what it's doing, has low prices, high quality, 225 00:26:06.800 --> 00:26:11.720 efficient clerks, is courteous, extends credit, gives you service? If you go into business 226 00:26:11.720 --> 00:26:14.680 next to them, you'll go broke and you know it. 227 00:26:14.680 --> 00:26:19.320 What you're going to do is look for that grocery store that isn't doing a good job. 228 00:26:19.320 --> 00:26:24.960 You're going to look for the fellow that has high prices, bad quality, is inconsiderate, 229 00:26:24.960 --> 00:26:31.580 his clerks don't work right, there's no convenience, it's not run correctly. 230 00:26:31.580 --> 00:26:37.360 You can go into business next to him because you can get some of his customers away from 231 00:26:37.360 --> 00:26:38.360 him. 232 00:26:38.360 --> 00:26:39.360 It would be easy. 233 00:26:39.360 --> 00:26:48.600 So when you have a free market, the free market tends to discipline the entrepreneur, even 234 00:26:48.600 --> 00:26:53.480 when there isn't a competitor. Now if you don't have a free market, you don't have 235 00:26:53.480 --> 00:26:58.320 to be disciplined. Let me give you an example of that. Take the government operation of 236 00:26:58.320 --> 00:27:05.680 the postal system. Here you have a prime example. There is no competition. Why? Because there 237 00:27:05.680 --> 00:27:10.860 There is a law against it. The government passed a law to prohibit anybody from getting 238 00:27:10.860 --> 00:27:16.820 into this area. So how efficient is the postal system? They don't have to be efficient. 239 00:27:16.820 --> 00:27:22.160 Nobody can compete with them. What about dollar competition? It doesn't make any difference. 240 00:27:22.160 --> 00:27:26.560 The postal system doesn't have dollar competition. It doesn't make any difference whether you 241 00:27:26.560 --> 00:27:32.520 patronize them or not. You'll pay for it in taxes. So there's no dollar competition. 242 00:27:32.520 --> 00:27:39.040 There's no market competition. There's no direct competition. But you know, even here 243 00:27:39.040 --> 00:27:44.520 the government doesn't have a complete monopoly because there still is parallel competition. 244 00:27:44.520 --> 00:27:51.200 You can communicate without writing a letter. So it shows even how difficult it is for the 245 00:27:51.200 --> 00:27:57.440 government to nail down and create positively a monopoly. 246 00:27:57.440 --> 00:28:04.320 In a free market, the factors of competition will exist and will flourish. You don't 247 00:28:04.320 --> 00:28:11.920 have to worry about a free market moving in the direction of monopoly. On the contrary, 248 00:28:11.920 --> 00:28:18.240 a free market will tend to sustain competition, it will continually introduce new competitive 249 00:28:18.240 --> 00:28:24.820 factors, and the only danger you ever have for monopoly begins at the point where government 250 00:28:24.820 --> 00:28:27.500 Thank you very much.