Nothing is preventing businesses from taking trash to the dump for a buck, except unprofitability. All profit is derived from economic friction. Regulations are simply friction, in economic terms. This ideological push for friction-free, perfect competition markets that infects our political/economic thought is anti-capitalist, anti-business, and fundamentally absurd. In perfect competition, all profit margins are driven to zero. The only source of profit is barrier to entry. Read Peter Thiel. He talks about this extensively in Zero to One, and he's not some treehugging commie.
In this light, regulation isn't an impediment to business - it's an opportunity. By making the task more difficult, we make it more profitable.
Now, I'm sure you're anxious about some sort of corruption where businesses collude with government to lock out competition. So, tell me... what is a contract? Is it anything other than a regulatory mechanism to exclude competition?
Suppose you start the BuckABucket Trash Company, and charge a buck. I hire you because you're cheap. Then you come back next week and find out I've ditched you for GayNinety Trash Company, who charges 90 cents. Sucks, right? Makes it very hard to commit capital to the business! You just bought a truck and everything. The way you prevent this behavior is by locking me into a contract - you'll take out my trash for a buck, but you get to do it for the next year. Everyone wins. I get cheap reliable trash service, you get a steady customer.
Except now we've just regulated away your competition. Funny, that.
Really, put down the right wing ideology feed about economics and think about how it actually works.
The source of profit isn't friction, it's scarcity. Friction can create scarcity by harming competition, but that is actively harmful. In some hypothetical utopia with literally zero scarcity, nobody cares about profit because everything is free.
In any real system with non-zero scarcity, profit is relative. If you have less of it in one place there is more of it in another. In the case of things like garbage collection, the other place is when consumers use the money they didn't burn on artificially wasteful trash collection to buy something else. Which benefits both the consumers and the suppliers of the other product.
Creating friction on purpose to artificially increase the profits of one industry is a deadweight loss. The transfer of wealth is the broken window fallacy but the resources wasted on the artificially imposed friction are real.
And many types of contract are a violation of antitrust law for exactly that reason.
I think you're far too focused on corruption here.
As I've pointed out, contracts are friction. And, since profit without friction is impossible (scarcity is just one form of friction), contracts are a Good Thing, a thing that makes capitalism viable.
Illegal monopoly behavior is just a pathological corner case of contract law, and it's silly to focus on it. Consider an alternative - you contract me for a service, and I reduce my costs and increase my profit by simply not providing that service. This isn't exotic. This is common as dirt, happens every day.
> I think you're far too focused on corruption here.
Because that's what we're talking about -- the thing that prevents an ordinary person from collecting trash for $1 and taking it to the dump in a way that doesn't involve externalizing costs or doing anything nefarious, yet is still prohibited.
There are approximately zero people who think it should be legal to dump trash in the river.
> As I've pointed out, contracts are friction.
Except that contracts are anti-friction. If you have someone collecting trash for $2 even though it costs $1 because they're the only one with a truck (so scarcity), someone else might be willing to buy a truck and do it for $1 but only if they're guaranteed the business for a period of time sufficient to pay off the cost of the truck. So the contract reduces friction by $1.
Your claim is that it then prevents it from being reduced by another $.10 when the first guy offers to do it for $.90 to try to regain the business, but the only reason that would happen is that the contract allowed the second guy to enter the market. And you can do all of this negotiating before signing with anyone -- go to the first guy and demand $.90 or you'll sign with the second guy for $1. Then the existence of contracts gets you to $.90 when otherwise you would be stuck at $2.
You may not even need to actually enter into the contract for the existence of contracts to reduce friction, because each provider knows you could enter a contract with the other and at least one would prefer to provide you service at a low price with no contract than have you sign with the other guy.
> And, since profit without friction is impossible (scarcity is just one form of friction), contracts are a Good Thing, a thing that makes capitalism viable.
Unless you're just defining friction to mean scarcity, I'm curious what these other forms of friction are that can produce profit without scarcity.
For example, adding any amount of friction to the process of producing table salt by chemical reaction isn't going to make table salt more expensive because there is so much in the ground that even a hard prohibition on manufacturing it chemically wouldn't materially affect the market price.
And the fact that profit comes from scarcity still doesn't mean you ever want more scarcity on net as a society -- there is plenty of "real" (no known way to avoid) scarcity to profit from without wastefully creating more on purpose.
> Illegal monopoly behavior is just a pathological corner case of contract law, and it's silly to focus on it. Consider an alternative - you contract me for a service, and I reduce my costs and increase my profit by simply not providing that service. This isn't exotic. This is common as dirt, happens every day.
And then you get sued for breach of contract, the judge orders you to make good and now you have that expense plus the legal expense. How is that supposed to increase your profit?
Unless you mean breaking the law and getting away with it, but in that case what's even more profitable is bank robbery, right?
The reason these things are all illegal is that they're a form of conduct that increases rather than reduces friction, which is why they're against the law. Because friction is bad.
I had the impression that profits are derived from the reduction of economic friction. The more efficient a process is the more profit it can produce (compared to a less efficient process).
Not really. It's not about efficiency. It's about being able to beat the friction more effectively than your customers could on their own, whether it's friction they could beat on their own (ie it's easier to eat out than to cook), or friction they could not beat on their own (like they can't manufacture a CPU at home).
But "beat the friction more effectively" is just the definition of efficiency. If it takes an individual an hour to make dinner at home but a chef in a restaurant can make dinner for 10 people in the same hour then they're 10 times more efficient (but offset by the efficiency loss of needing a separate building etc.) That might allow the restaurant to break even.
If the chef can make dinner for 30 people in an hour at the same price per person, now the restaurant is more profitable because there is less friction -- 30 people eat in one restaurant instead of 10, so for 30 people you need one chef instead of three, one building instead of three, etc. Less friction, more profit.
What you need for profit isn't for you to have friction, it's for someone else to have more than you -- relative advantage. The more you eliminate the more profit you make. Or the more surplus ("consumer profit" if you will) you create for the customer, if you have similarly efficient competitors engaged in price competition.
And that's where regulatory capture comes in. In competitive markets a large fraction of the total surplus goes to the consumer because otherwise a competitor could gain market share by charging lower prices. 100 times $6 is more than 50 times $10. But if you exclude competitors with regulations then you can charge $10 margins and still have 100% of the customers. Then there is more "profit" but not more total surplus -- there is less total surplus because the artificial friction consumes some of it. So you're shrinking the pie in order to get a bigger piece of it for yourself, at the expense of everyone else. Which is effectively stealing.
In this light, regulation isn't an impediment to business - it's an opportunity. By making the task more difficult, we make it more profitable.
Now, I'm sure you're anxious about some sort of corruption where businesses collude with government to lock out competition. So, tell me... what is a contract? Is it anything other than a regulatory mechanism to exclude competition?
Suppose you start the BuckABucket Trash Company, and charge a buck. I hire you because you're cheap. Then you come back next week and find out I've ditched you for GayNinety Trash Company, who charges 90 cents. Sucks, right? Makes it very hard to commit capital to the business! You just bought a truck and everything. The way you prevent this behavior is by locking me into a contract - you'll take out my trash for a buck, but you get to do it for the next year. Everyone wins. I get cheap reliable trash service, you get a steady customer.
Except now we've just regulated away your competition. Funny, that.
Really, put down the right wing ideology feed about economics and think about how it actually works.