Nature of Monopoly
When any company has a monopoly on any product or service, the
(natural) free-market incentive for improvement has been reduced or eliminated. The customers have to accept
whatever prices and services are offered by the monopoly, or go without those
products or services.
Politicians sometimes claim to "protect the public from
monopolies" by regulating business and trade. Teddy Roosevelt (and others)
made a big deal (and political careers) about "trust-busting"
— destroying companies they called monopolies.
Private companies (even Microsoft) cannot corner the market
without the help of government regulation. No matter how big any company
becomes, it will have competition unless government stops others from competing.
Many wars have been fought over trade monopolies. In the Opium
War, Britain and the US forced China to buy opium and sell tea. The American
Revolution was in part caused by the tea monopoly of the British East India
Company. Japan's attack on Pearl Harbor, bringing the US into WWII was
instigated because the US/British oil monopoly cut off gasoline to Japan,
thereby threatening to shut down industry and transportation.
The results of monopoly are always combinations of high prices, inefficiency,
poor service, lack of innovation, shortages, and stagnation.
Do You Have a Collectible?
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Post Office Monopoly in U.S.
Question: How did the USPS get a
monopoly on delivering mail in the United
Answer: The United States
Postal Service was set up by
Congress to deliver mail, but it wasn't originally
a monopoly. When Lysander Spooner (a revolutionary
patriot who later became a Justice of the Supreme
Court) started a competing mail service, Congress
passed a law prohibiting other companies from
competing in the delivery of "regular
Here's a story showing the
monopolistic attitude prevalent in the USPS, and
one customer's reaction.
I used to have a post office box to
receive my mail because, when I was at work during
the day, I wanted the things I bought through the
mail to be safe, rather than just left on my door
step like the postman used to do. And then I could
pick up my mail and any mail-ordered boxes when it
was convenient for me. They would be safe at the
post office until
I got there.
But it kept being a problem
when I ordered something from a catalog or on eBay
when the shippers wanted to deliver by UPS or
Federal Express. That's because the United States
Postal Service (USPS)
won't accept things shipped by anyone
else other than their own people. And yet, being a
small rural area, there wasn't enough of a market
for some other mailbox company, like Mailboxes Etc.
or others, to open up an outlet. It might have been
nice if the post office had not been there, so one
of the others could be there instead. (I think
almost all other
companies will accept all mail including letters and
packages from the post office, UPS, and others.)
The head postal lady (at the
post office I went to) was always nice and I was
nice to her. But one day I said that it was a real
problem for me that they would not receive any
packages sent by UPS. I was always having to make
special arrangements, which was not the purpose of
having a p o box. I could not believe what she said
to me. She said that UPS was her competition, and
that she couldn't receive something from the post
I guess I knew that was the
reason, but it made it seem more unreasonable when I heard
her saying those words.
When I thought about it later,
I was even more upset. Her company (the USPS) has a
(a keyword this website uses) because it
gets its money from taxes that I and
everyone pay. That monopoly stops other companies
from having the same business opportunities as they
have. But it's not fair that the USPS
gets to overpower other companies but it doesn't
make up for the loss of services that the other
companies would provide. I know I am not the only
person who loses in this deal.
I really appreciate this contribution.
This person's story illustrates how
the advantage of monopoly keeps private businesses from
competing, thereby creating no free-market incentives to
provide the services that customers want and need.
On the one hand, the post office is
usurping competition by using public monopoly monies
that the competition doesn't get (giving the post office
a competitive advantage).
On the other hand, the post office won't
offer services that the displaced competitors would