No. This is mostly wrong. In every cartel, there is an incentive for each independent firm to cheat. That drives prices down.
We’ve seen this in OPEC and every other so-called cartel. In the 1970’s and 80’s, Saudi Arabia was the “enforcer” for OPEC. If they thought too many were “breaking the rules”, they pumped so much oil that they crushed the cheaters. That power didn’t last forever.
For any cartel, there must be an enforcer. This is also ignored.
The author ignores economies of scale, which lead to fewer producers. The author also ignores government participation in the market with subsidies - as in health and education. It’s these subsidies that drive up prices.
Worst of all, the author speaks of a wealth transfer from poor to rich when an innovative new product is priced for profit. That is Luddite thinking. *Everyone* is enriched by the new value created. The innovator may capture more of the newly created value than the author thinks is fair, but *nothing* is “transferred” from the poorer, who are in fact also enriched by the newly created value.
Really enjoyed this post, do you have twitter or other social media I can follow? Thanks for writing this.
No. This is mostly wrong. In every cartel, there is an incentive for each independent firm to cheat. That drives prices down.
We’ve seen this in OPEC and every other so-called cartel. In the 1970’s and 80’s, Saudi Arabia was the “enforcer” for OPEC. If they thought too many were “breaking the rules”, they pumped so much oil that they crushed the cheaters. That power didn’t last forever.
For any cartel, there must be an enforcer. This is also ignored.
The author ignores economies of scale, which lead to fewer producers. The author also ignores government participation in the market with subsidies - as in health and education. It’s these subsidies that drive up prices.
Worst of all, the author speaks of a wealth transfer from poor to rich when an innovative new product is priced for profit. That is Luddite thinking. *Everyone* is enriched by the new value created. The innovator may capture more of the newly created value than the author thinks is fair, but *nothing* is “transferred” from the poorer, who are in fact also enriched by the newly created value.
This is poor economics. Very poor.