…as in, “Universal Entities controls 73% of the Gerbilator market.”
Uh, no, actually they probably don’t. IBM once had something like 70% of the market for computer hardware, software, and services. The big integrated steel companies, Bethlehem Steel and US Steel, once had a very high share of the American steel market. Sears once had a high share of the retail market. These examples could be multiplied easily and almost endlessly.
A seller into a market does not control that market, or its position in that market, absent direct violence (the Mafia and various drug cartels, for example) or heavy government intervention–and even the latter is unlikely to be reliable in the long term, as the owners of TV station licenses facing first cable competition, and later Internet competition as well, found out, and as the owners of taxicab franchises facing Uber and similar competition are now discovering.
The phrase “controls X percent,” when applied to a market, is almost always intellectually lazy, and is used far too often by writers who should know better.
The idea of “control” here follows from a common, if mistaken, economic intuition: The idea that there is such a thing as “economic power,” the use of which is morally equivalent to the use of fraud or physical force.
To recast the old joke:
MAN: Would you sleep with me for a million dollars?
WOMAN: Would you wave a gun in my face to get me to sleep with you?
MAN: Good heavens no! What kind of monster do you think I am?
WOMAN: We’ve already established that you’re a rapist. I’m just curious about what sort of weapons you prefer to wave in your victims’ faces.
Or the old saw about “When you owe the bank a million dollars, the bank owns you. But when you owe the bank a billion dollars, you own the bank.”
In both cases, there is this idea that some sort of “economic power” or “economic clout” governs the interaction, rather than it being an interaction between two free and equal agents, one of which happens to be much richer than the other. But this “economic power” turns out to be phantom, an illusion, if you examine it closely – either there is no power there at all, or it turns out to be plain old criminal or government force, wearing an “economic” mask. (“Nice business you have there. Be a shame if anything happened to it.”)
And it’s this sort of illusionary or disguised “economic power” that people are vaguely thinking of when they talk about a large company’s “control” of their market share.
A lot of this is the economic ignorance of reporters and politicians. Peggy Noonan has a column today at WSJ about the obscene selling of the office by politicians today. She recounts the story of Harry Truman who left office really broke and struggled with no pension and no office allowance to make some money by writing his memoirs. I have a copy on the book shelf behind me.
” A bigger disappointment was money. With the cost of staff, researchers and office rent, his net profit, he figured, was only $37,000 over five years. He was shocked he had to pay 67% federal and state income taxes. Truman had supported high tax rates for broad government services pretty much all his political life. There was a sense in his letters this was the first time he personally felt the cost of the policies he’d professed. He called the taxes “crushing.” He pushed for a bill in Washington for office money for former presidents, and—rightly, fairly—got it.”
The Clintons will never feel that reality that Truman and McGovern felt when they left office. They were selling the Lincoln bedroom to people who were selling US missile technology to China. No comparison.
Again we come to the issue of metaphors. Words don’t control or even necessarily explain reality. However, people often use metaphor as a cheap substitute for empiricism, or to dodge empirical investigation that might invalidate their agenda. Argument isn’t evidence.
A better verb in place of “controls” might be “enjoys”. Kodak once enjoyed a dominant market share… Nash-Hudson-American Motors submitted to but never enjoyed their place in the auto market pecking order… Commodore Business Machines, for one brief shining moment, enjoyed a _Lucky Pierre_ position between the gaming and home office markets…
The experience is fleeting. And the notion that a company or industry should be sustained in the face of fickle market preferences is utterly repugnant. NetFlix has quite properly, if momentarily, taken share from Blockbuster. Lyft and Uber should dethrone if not destroy Yellow Cab. “Neither corporations or individuals have the right to come into court and ask that the clock of history be stopped, or turned back.”
The market has affections to be wooed and perhaps won. It has not any features to be tied up, dominated, or controlled.
“Enjoys” is a good term. As Pouncer notes, the enjoyment is generally pretty transient.
When everyone is talking about how Company X is so overwhelmingly dominant in its market that the government needs to do something about it, then it’s time to start thinking about selling the stock….NOT because of the threat of government intervention, but because Company X is likely past its prime growth years and is getting fat and happy.
How’s that Microsoft browser and operating system monopoly doing?
Agreed, DF. I also dislike “forced” which rarely refers to coercion.
The only entity that can legally force you to pay for or buy something is the government. That is control by force of law. One of the reasons that companies substitute economic rent seeking through political activities is that the government can force us to pay for what it buys and can require you to buy what their supporters are selling, such as health care. The most powerful force in a market is substitution by consumers. There are not many goods and services that really don’t have any substitute with either a substitute good or supply source. Unless the government gets involved.
There are few natural monopolies and they are often transitory. Attempts to regulate them generally result in the capture of the regulation bureaucracies by these companies and the use of the regulation as a barrier to entry in exchange for political support. The Ma Bell telephone monopoly is a prime example. The more global the market is, the less monopoly can survive. The “competition for the market” process shows some improvement over simple regulation of a monopoly or a public good or government supply of a largely public good.
The use of “control of a market” terminology is quite handy if you want to depict consumers/buyers as powerless, manipulated victims of the sellers. This sows the seeds for all manner of market intervention by the political sector and the creation of vast bureaucracies to preside over the distribution of economic rents paid for by the crony capitalists.
The only possible way to prevent such political corruption is to prevent the political system from having the power to grant such economic rents under the guise of public interest. This the founders tried to do, but that has largely been circumvented by the electorate and the resulting corruption of the legal system. I have no idea how the genie gets put back into the bottle, especially since the ideology of government intervention is so firmly instilled into our culture.
Mike
Sellers don’t control any market…an arrogant point of view.
You serve customers and markets…but the moment you think you control something, then you start to believe too many press releases.