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prices may not be any lower with regulation than without regulation. |
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Fortunately, the areas in which technical considerations make monopoly a likely or a probable outcome are fairly limited. They would offer no serious threat to the preservation of a free economy if it were not for the tendency of regulation, introduced on this ground, to spread to situations in which it is not so justified. |
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2. Direct and Indirect Government Assistance Probably the most important source of monopoly power has been government assistance, direct and indirect. Numerous examples of reasonably direct government assistance have been cited above. The indirect assistance to monopoly consists of measures taken for other purposes which have as a largely unintended effect the imposition of limitations on potential competitors of existing firms. Perhaps the three clearest examples are tariffs, tax legislation, and law enforcement and legislation with respect to labor disputes. |
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Tariffs have of course been imposed largely to "protect" domestic industries, which means to impose handicaps on potential competitors. They always interfere with the freedom of individuals to engage in voluntary exchange. After all, the liberal takes the individual, not the nation or citizen of a particular nation, as his unit. Hence he regards it just as much a violation of freedom if citizens of the United States and Switzerland are prevented from consummating an exchange that would be mutually advantageous as if two citizens of the United States are prevented from doing so. Tariffs need not produce monopoly. If the market for the protected industry is sufficiently large and technical conditions permit many firms, there can be effective competition domestically in the protected industry, as in the United States in textiles. Clearly, however, tariffs do foster monopoly. It is far easier for a few firms than for many to collude to fix prices, and it is generally easier for enterprises in the same country to collude than for enterprises in different countries. Britain was protected by free trade from widespread monopoly during the nineteenth and early twentieth centuries, despite the relatively small size of her domestic market and the |
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