Microsoft a monopoly??

Would this be the same Microsoft that is having difficulty competing with Linux offerings in a certain EU municipality? The same Microsoft that sends number 2 honcho Steve Ballmer to save accounts in Europe?

Microsoft's time of gathering entrepreneurial profits is drawing to a close. That is all that they have gained - entreprenerial profits.[1] There has been a lot of confusion about Microsofts profits, usually being characterized as "monopoly profits" but as Murray Rothbard points out in Man, Economy, and State it is not possible for Microsoft to become a monopoly without _a grant of privilege from the state_[2]. There is no law (yet) giving Microsoft any privilege that would require me to do business with Microsoft, therefore they cannot have a monopoly. I am free to use another product or even produce my own. If legislation requiring computers to use Digital Rights Management schemes being pushed by Microsoft should become law, then they will have gained a monopoly.

fn1. Assuming that the various complaints (such as Sun v. MS re:Java) of dishonest contractual dealings have been fairly resolved.

fn2. Corporate status is technically a grant of privilege, however, it does not grant any privilege sufficient to allow Microsoft (or any other corporation) to gain monopoly profits.

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There is no law (yet) giving

There is no law (yet) giving Microsoft any priviledge that would require me to do business with Microsoft

On the other hand, a whole hell of a lot of your tax money goes to buy Microsoft products for government offices. I've seen government job listings where the applicant's resume had to be submitted in Word format. If the government were serious about stopping a Microsoft monopoly, it wouldn't be forcing us to pay for its products while it forces us to pay for lawsuits against it.

One thing that bothers me

One thing that bothers me about the word "monopoly" is that to me it suggests that the company has 100% of the market. but what I tend to see is that if a company has 75% of the market or more, it is called a monopoly.

Calling Microsoft a monopoly is a joke in my opinion. Folks often forget how they beat out Apple by opening up their API much more than Apple allowed. Now with Linux even opening things up more, it could be a few years before Microsoft only controls a minority of the market.

On the other hand, a whole

On the other hand, a whole hell of a lot of your tax money goes to buy Microsoft products for government offices.

In fact, convincing the government to go all-Windows is one of the biggest reasons Microsoft got its big market-share in the first place.

You're exactly right, shonk.

You're exactly right, shonk. This is a case where the gov't has distorted the market simply by being a customer.

There is no law (yet) giving

There is no law (yet) giving Microsoft any privilege that would require me to do business with Microsoft, therefore they cannot have a monopoly.

Not quite, the various Copyright, Trademark and Patent offices do give them numerous legal monopolies from which they militantly employ.

I do have some sympathy for them (simply because much of the conjecture surrounding this case used "fairness" as a justification for their punishment), but Microsoft is hardly calling for the abolishment of any and all State-based monopolies.

Natural monopolies exist

Natural monopolies exist when a market will only support one producer of a given good. A pharmacy can be a natural monopoly in a small town if there is not enough business to support more than one pharmacy.

There's another kind of natural monopoly that exists when there can be only one producer of a good. A star baseball player has a natural monopoly on his autograph - collectors are generally far less interested in copies produced by others.

Natural monopolies are benign though; state granted monopolies are not.

I believe that MicroSoft has

I believe that MicroSoft has received other dispensations from the government as well. In their "settlement" of the last DOJ antitrust case, they were permitted to pay a substantial portion of their fine using donations of their software to public schools. Heck, that's better than printing money, and it gives them even more leverage in the Department of Education.

Shonk, I have to disagree

Shonk, I have to disagree about how they got market share. PC-DOS and MS-DOS were pretty much standard fare for PC platforms from the mid 80's through early 90's. The fedGov didn't start going heavily into Microsoft until after the introduction of Windows NT. In fact the whole purpose of NT was to get into the last major desktop segment they did not dominate, the government.

Tim, yes the various IP rights are privilege. No they are not really helping MS's market position. MS relies primarily on trade secrets for IP protection i.e. not government privilege. The patents and copyrights are not sufficient to allow MS to gain monopoly profits, and in fact have actually encouraged competing methods such as Ogg Vorbis multimedia codecs and formats.

John, calling the sole producer in a limited population a "monopoly" is accurate vis a vis the derivation of the word but makes the word worthless for discussion of economics. The sole producer in this case can not charge monopoly rates. If he does then someone will come along and put him out of business by offering better rates. He can charge higher rates than in a major population center, but this turns out to be only sufficient to deal with the added costs of dealing in a limited population area. Bruno, the sole producer of hotel, gasoline, and restaurant services in Gerlach, Nevada can't get monopoly profits.

David: Even in the DOS era,


Even in the DOS era, MS was able to use it's size to kill off its competition. They made specific changed to early Windows versions that made it incompatable with DR-DOS (an arguably superior version of DOS). Since they prevented their competitor from interoperating with the only graphical applications on the PC at that time, DR-DOS died messily.

I agree that NT was their shoehorn into the FedGov. It was their first OS that could be C5 security certified. However, they've distorted the market for government software by dumping copies of their software on every branch. The Army recently had to tell them to stop pushing their free software to their servicemen. They've been using that as a loss-leader because they know that once their using their software, they'll make the money back many-fold in license renewal, and switching to an alternative OS can be cost prohibitive.

You're correct that MS relies heavily on trade secrets for IP protection, but that's not the problem. They have a great many software patents as well. The reason that they don't use them offensively is due to cross-licensing. All major software houses have a stable of patents. They don't use them offensively except in special cases. Instead, they cross license patents between each other to indemnify them against lawsuits from their competitors. (which is why any software company that is not suicidal does not fuck with IBM) It's a neat, government sanctioned method of preventing start-up competitors from entering the market without being clobbered by lawsuits on all sides.

That's the dispensation that MS (and all other major software companies) are using to prevent competition. Software patents have precisely the opposite effect on innovation that the framers desired. For that reason alone they should be eliminated.

As for MS being sued by the EU? Color me unsurprised. The common perception is that they're going to go through with what the DOJ botched so horribly here, especially since the suit was immediately dropped by Bush's new Attorney General. I don't believe that antitrust lawsuits are moral or effective, but I think that MS is a perfect candidate according to EU and US law.

Microsoft DOES benefit from

Microsoft DOES benefit from governmental privileges of Information Protectionism (aka "Intellectual Property"). See my article Government and Microsoft: a Libertarian View on Monopolies.

Fare, If I create a widget


If I create a widget and you wish to acquire my widget and I say sure but only if you use it for economic and philisophical illustrations, and you agree - what evil have I committed? Am I not entitled to further compensation and/or return of the widget if you use it to demonstrate physics - contrary to our agreement?

I agree with JTK about the

I agree with JTK about the existence of natural monopolies. In the computer industry, these occur because of network externalities (the more people that use it, the more useful it is), and because of the massive economies of scale in the information industry (very low marginal cost).

I have mixed feelings about whether a natural monopoly is benign. On the one hand, when we compare it to alternatives, it is. Someone will have the monopoly, there is no non-monopolistic alternative. Whereas the govt. granted monopoly could simply be revoked, thus making the relevant market more competitive.

On the other hand, this doesn't mean that a natural monopoly is serving its customers as well as a competetive market. As a simple example, contrast statism with anarcho-capitalism. Given the prevalence of states (with geographic monopolies on the use of force) in the world, it seems likely that states are a natural monopoly. Yet because of this monopoly, states do a crappy job of servicing their customers.

I think barrier to entry is a big contribution to how well a naturally monopoly does. If there is a low barrier to entry, that means anyone can threaten the current monopolist with the possibility of taking over their niche. So the current monopolist has to do a good job to prevent this from happening. But as the barrier to entry gets larger and larger, it gets harder and harder to displace the monopolist, and they can do more sitting back and raking in profits without work.

In the Microsoft case, I think the patents, pre-existing market share, and huge cost of developing a user-friendly OS contribute to a very high barrier to entry.

And in the case of states, the barrier to entry to the governing market is even higher. (Though I'm working on lowering it :) ).

Patri - I do not have a

Patri - I do not have a single bit (pun intended) of Microsoft on the computer I am writing this on. Yet most of the readers and authors here do, and we are all enjoying the network effects. Network effects turn out to be only effective when they are based on common, accepted, and freely available standards. The only such thing Microsoft wholeheartedly endorsed was the hardware specifications of the Intel-based PC.

Since both you and JTK have suggested the possibilities of natural monopolies, I think I'll go review some economic texts and post a blog entry about that some time in the future. Your mention of government as a natural monopoly is going to require some careful thought.

wkw3 - I have no problem

wkw3 - I have no problem getting rid of patents, especially software patents. But Microsoft did not have sufficient patents of any sort to rely on. It is only within the last few years that MS has gone after a patent portfolio. I also have no problem with a company using its size to outcompete others, so long as its size is not due to government granted privilege. In the case of Microsoft, I don't believe government privilege had much effect on company size. BTW, how would you propose to enforce Microsoft testing their Windows product with alternative OS's to maintain compatability?

David, if you make a chair,

David, if you make a chair, and I copy it (not having signed any agreement not to copy it), and you disagree, what crime have I committed? If you consequently send thugs in uniforms after me, what crime have you committed? If you send men in suits who threaten to send thugs in uniforms after me, what crime have you committed?

Fare - What do you think

Fare -

What do you think about non-disclosure agreements?

If I make a chair, and I only let you look at it if you agree not to copy it but you do anyway, then you have committed fraud, specifically you have broken our contract. If I then require you to attend arbitration, then that is self defense.

David - I am currently

David - I am currently getting my MBA, and I have to have Microsoft Office. No choice. I have tried using OpenOffice, and its spreadsheet and word processor do not have all the required functions. They are decent, but not quite good enough.

The question of whether government is a natural monopoly is an important and interesting one. It is a fairly common argument against ancap. I think the empirical evidence is fairly depressing. BUT I think there are ways to change the incentive structure to reduce the monopoly effect.


Non-disclosure agreements
(1) do not bind third parties
(2) are not implicitly accepted.

Oh, and I don't mean that

Oh, and I don't mean that there should be or would be no NDAs in a free society -- there would. But since the enforcement wouldn't affect third parties, and that the enforcement costs of keeping the shared secret actually secret wouldn't be externalized to the public, there would be much less of it -- and only in economically sound cases.

Oh, and Microsoft is evil

Oh, and Microsoft is evil precisely because it does leverage to a previously unconcieved extent these two attempts to liberty: binding third parties, and externalizing enforcement costs. Of course, Microsoft also does good things -- exactly in as much as these good things are necessary to leverage the fundamental racket.