(This is a continuation of a thread over at Community that had both drifted off its original topic, and become rather large and unwieldy.)

Picking up where we left off ("Re: Some more thoughts" by Tom):

Your examples from Adam Smith were educational. I'm ashamed to admit I have never read him myself.

Oh, I understand! It's a chore, albeit a rewarding one. The archaic English reminds me of the cliche "two peoples divided by a common language." Smith uses familiar words like "corporation" in a sometimes unfamiliar way. And those English currency units, sheesh--I can't intuitively grasp the relative values of 3 pounds 17 shilings three pence versus 2 guineas 8 shillings tuppence. Ohhhh....

Yet it's worth it. Religious dogma and economic and political theories mutate over time, sometimes through improvement, sometimes through self-serving distortion. Gotta go back to the original to get it straight. After I finish Smith, I plan to tackle Marx and see what changes a hundred years wrought, and again judge the difference between the original and the modern popular dogma.

After that, things seemed to go off on a tangent. Tom, you tend to see things in a binary way, and in this instance you're misinterpreting what I'm saying as monopoly versus non-monopoly. But I'm talking about intermediate states, and the power of concentrations of economic power to distort the playing field, without necessarily controlling it absolutely. The key point missing is the interaction between economic and government power.

It is not faith. It is observation, science, and knowledge of human nature.

Indeed. Very few of Smith's examples of government intervention in the marketplace were initiated by government. The large majority of the examples he cites were demands by powerful business interests for preferential treatment: Tariffs, licensing and certification requirements, tax breaks for the supplicant and tax disadvantages for his competitor, unnecessary monopoly (e.g., foreign trade controlled by a charter company), arguments that this or that industry is vital to the national security/defense/welfare and must be protected, domestic content laws (in Smith's day too), special taxes and assessments on new entrants to a marketplace, specious charges of monopoly leveled against a dominant player (shades of Microsoft)...I got the distinct feeling that there's nothing new under the sun.

With increasing economic power and therefore political power, the forces of the market become increasingly asymmetrical. Spending a little of that wealth on influencing government is an insurance policy, designed to make the forces of downward correction relatively weaker than the power of upward progress. The more wealth, the better the insulation, and the more wealth becomes self-sustaining for no better reason than that it exists. The free market is thus defeated.

While you fret that the people will take unfair advantage of government power, business has a long historical record of doing just that. When you call for the government to step aside and let business do its thing, consider carefully what thing you're unleashing.

Think hard--if you give me a dumb example I'm going to jump all over you. ;)

Yes, I know that about you, Tom. You're asking for examples of monopolies when I'm not talking about monopolies; more useful is an example of the kind of special pleading by a powerful business interest with no other intent than to thwart competition: The Digital Millenium Copyright Act. Hollywood is threatened by the Net and digital media in general, and it should be. But instead of coming up with ways to capitalize on the technology to improve efficiency, sales, and profits, they demanded that the government put a stop to the technology. For example, it turned out that DVD encryption was insufficient to defeat the long-recognized "fair use" doctrine of copyright law, and so the DMCA criminalizes even talking about how to do it. You've heard about the poor Russian bastard who's facing prison over this, and his employer is facing a fine of something like half a million. Fear of the DMCA has caused encryption researchers to pull scientific papers and cancel presentations at professional meetings. Napster's a famous example--the music companies failed to come up with a method of distributing music online, and when somebody else did, the vested interests reacted by shutting them down instead of coming up with a better way.

I understand that there are property rights at issue, but it's a nuclear solution to a problem that requires the scalpel of innovation. The side effects are enormous, and Mary Anne touched on some of those that diminish public access to information. The effects on the free market are exactly as distorting as if government had done this on its own initiative.

I've been involved in several startups. Have you?

I've been involved in quite a few startups, thank you very much. As an independent consultant, when there was work to be had I moved around between clients and experienced quite a few different companies, from the unthinkably large to (relatively) small startups. During the dot-com era I was constantly bombarded with blandishments to join the startup and work 80 hours a week in exchange for gazillions in stock options and little in real money.

I joined only one dot-com startup, and it was the kind you'd guess by now I'd appreciate: Relatively small, and focused on a worthy and reasonable ambition, putting one of the world's finest libraries of early Christian documents online--illuminated manuscripts, parchments and scrolls...[drool]. I was Chief Technology Officer, and the CEO was the fly in the ointment, due to his audacious ambitions to build "JOL--Jesus On Line". He tried to buy an ISP to bundle dial-up service with a Web site--sheesh. The Chairman, and curator of the physical library, got fed up, dissolved the operation and started over with a completely new group, smaller and even more tightly focused. And they made it, and they're online and surviving (albeit without me); while all the high-flyers who plied me visions of riches are smoking rubble.

The biggest flaming failure was a dot-com that catered to the VC crowd itself. I built an IPO collaboration site where the investors, bankers, lawyers, and CEOs would gather to work on their plans and SEC filings. My site helped handle such famous IPOs as eToys and most of those from the infamous incubator IdeaLabs. I couldn't help but notice how a very small group of people was involved in so many deals, and how the VC industry was pretty much organized like a Japanese kaibatsu(?) doling out patronage and relying on "relationship networks" to determine who would get a piece of the action.

Trust me, I know those people. I've seen the sausage being made.

Time to go try and be productive.

--Robert