Breaking Monopolies is One of Government's Most Important Responsibilities

Friday, January 11, 2013

Anne Korin and Gal Luft make a very persuasive argument in their new book, Petropoly, that the most influential free market advocates have always been in favor of one particular use of government: To prevent or break monopolies so free markets and competition could occur.

Many people are in favor of fuel competition but think the Open Fuel Standard is an overreach of government. Korin and Luft's arguments make it clear that nothing could be further from the truth.

Many people believe that the reason other fuels don't compete with gasoline is because they can't — they're too expensive. But this is not so. Ethanol and methanol can both be sold today for less money per mile than gasoline. The only reason people don't use them is because their cars are not warranted to burn them. The engines themselves could burn the fuel. But the cars are warranted to burn one fuel only, regardless of how easy and inexpensive it is to make them capable of burning all three. And that's the only reason fuels are not competing today.

What we have is a virtual monopoly. And since transportation underpins our economy, this monopoly rules our most economically important commodity. What would Nobel Laureate (in Economics) Friedrich August Hayek think should be done about this? He was, as Korin and Luft put it, "One of the greatest economists and political philosophers of the 20th century and the world's leading free market proponent...In 1945, Hayek published his triumphantly successful book The Road to Serfdom, a manifest in defense of markets and competition which made him the darling of conservative parties and leaders all over the world, including Margaret Thatcher."

Hayek said that you can't rigidly stick to rules with regard to free markets, and he named especially laissez-faire as one of those rules you should not be inflexible about. Hayek believed that the government should function as "a counterweight to monopolistic coercion" as Luft and Korin put it. That's exactly what we have in the transportation sector. "Cars that block competing fuels," they write, "are a barrier to the development of a free market in fuels."

Because we don't have any other attractive options for breaking OPEC's monopolistic coercion of our economy, Hayek would probably have wholeheartedly supported the Open Fuel Standard Act.

Another important and influential free market advocate was also a Nobel Laureate in Economics — Milton Friedman. He wrote that "the first and most urgent necessity in the area of government policy is the elimination of those measures which directly support monopoly."

What is something within our borders that directly supports the petroleum monopoly? The petroleum-only vehicle.

What could eliminate that monopoly? The Open Fuel Standard.

Many people are understandably angry at our government's constant interference and meddling in the free market. But freeing markets from a monopoly's dominance of an important commodity is one of the few good reasons our government should intervene. Let's hope this understanding reaches enough people in time.


Anonymous,  January 28, 2013 at 10:59 AM  

It cost me $350.00 to replace my fuel pump after using gasoline mixed with alcohol. Food prices have shot up due in part to using corn for fuel. We can't spare any arable land to grow fuel crops.

Anonymous,  January 28, 2013 at 11:17 AM  

Yet another example of our illustrious government overseers, making sure we have the "best" available. Yeah, right!It's about time we were allowed to act and think for ourselves, and not have to "bend over" for a group of freaking mosque monkeys that are hell-bent on our destruction. Don't believe it? Check out "holy" quran!

Anonymous,  January 28, 2013 at 11:42 AM  

The only problem is that the United States is using corn based ethanol which is a complete waste and drives up the cost of food. The better answer is ethanol from the sugar cane as this is not only clean energy but ethanol from the sugar cane like Brazil does gives off 5 times more energy than corn based ethanol.

Adam for Fuel Competition January 28, 2013 at 12:04 PM  

The idea that using corn for ethanol raises the price of food is oil industry propaganda, partly to cover the fact that the biggest cause of rising food prices is rising oil prices. Read more about that here.

The U.S. uses corn primarily because our farmers are so productive they were putting themselves out of business by producing too much and not being able to sell it for enough to pay the bills. Read more about that here.

But corn was only the beginning. There are better things to make ethanol from, some of which is being done now. Read more about that here.

Anonymous,  January 28, 2013 at 2:59 PM  

The big error , and this was promoted by government, is in using corn to produce the ethanol. There is a perenial grass that producwes several times the ethanol per acre that can be grown on land that can not be used for food crops and never needs replanting. This grass needs a different type of processing facility than that used for corn. And this is where the problem is, The government is aiding in building the corn processing plants but not for the grass processing plants. Many farmers would be harvesting the grass but have no place to sell it.

Informed Voter therefore a minority ...,  January 28, 2013 at 3:17 PM  

Fracking is the answer to Opec... Why else did UAE fund the left wing propaganda film Homeland ... What an innocuous title from America bashing Holy Wood ( intentional) . Russia is also funding disinformation campaigns , as we are producing natural gas at less than half the price there charging Europe for it . Green is the new Red ....

Anonymous,  February 20, 2015 at 8:32 AM  

Worldwide oil produced live:

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