Tax Old Firms More?
It is widely believed that free markets tend to undersupply innovation, and that new firms tend to be more innovative. Here is yet another compatible academic analysis:
A subsidy to incumbent R&D equivalent to 5% of GDP reduces welfare by about 1.5% because it deters entry of new high-[quality] firms. On the contrary, substantial improvements (of the order of 5% improvement in welfare) are possible if the continued operation of incumbents is taxed while at the same time R&D by incumbents and new entrants is subsidized. This is because of a strong selection effect: R&D resources (skilled labor) are inefficiently used by low-[quality] incumbent firms. Subsidies to incumbents encourage the survival and expansion of these firms at the expense of potential high-[quality] entrants. (more)
Many have suggested that we subsidize firm research, though it still seems puzzling that we don’t do more of this. Yes it can be hard to measure research spending, but that probably isn’t the whole issue. However, one rarely hears serious proposals to tax old firms more relative to young firms. (Exception here.) And the age of a firm seems even easier to measure.
Why not tax old firms more, or young firms less? This doesn’t seem to be a left vs. right issue, or to favor any other side of a familiar political divide. Is this another example of our pretending to oppose dominance by big powers, but really accept it?
"So, that's it? "Public utilities"?"
Public utilities are an extreme example, certainyl not the only sector where this happens.
"(Why not competitive bus companies? Is that somehow impossible? Would it really cost "billions"?)"
It would definitely be very expensive to set this up (you'd probably need your own busstops and you'd get a complicated ticket system, people hate it when they have to wait for the bus from the "right" company before they can hop on). As always, if the owners of the existing company represent less than 50% of the world's capital than you can in theory set up a second company but who would pour all his money into a project that might be slightly profitable 20 years from now? Why risk not breaking even within your lifetime when there are enormously profitable oligarchies to invest in?
"(I am intentionally disregarding the "undercut and destroy their capital" argument becausecan you show me even one time that ever happened?"
Walmart and the professional sports leagues in the US. The government of Ireland maintains ownership of the railways because research has shown the island is too small for even two profitable railway companies. The Chinese government has decided to employ this technique to break American and European solar companies. Many sectors in the world now only have 2 or 3 big players left (often from different countries), especially if you discount state owned companies, and they are routinely fined for price fixing (the EU catches a couple of them every year) and often the reason they haven't merged yet is because national laws forbid it. Also, iamgine what happens when actual laws of physics protect the monopoly or oligarchy, for example in the domain of radio frequencies (if you own the whole range no one else can transmit radio, gsm, wi-fi, etc...) or if some company owns all 15 mines of some rare Earth metal (competitors would be forced to obtain the metal from the much more expensive process of recycling, this could last for centuries depending on how full the mines are).
"That must be an amazing level of capital, to fend off more efficient competitors forever"
Maybe not forever, but if it lasts 100 years the damage has been done, especially if the new player just ends up becoming a 100 year monopolist themselves. The trick is that these big players are more attractive to investors to begin with. Investors aren't in it to for the good of humanity: if they can make things a lot better for themselves by making things a little worse for everyone else they'll take that opportunity (similar to the tragedy of the commons). I know American libertarians like to think they're smarter than the rest of the world combined but it's getting annoying, I guess that's backlash of decades of cold war era US propaganda against anything that even reeked of socialism (even though most of NATO was and is socialist by US right wing standards). Libertarian thinking about monopolies and oligarchies is not hindered by such practical details as people not willing to move to India for slightly cheaper groceries, and human lifespan being finite, that's why it's so out of touch with the real world.
Mr. Diamond: That's... nice? I mean, I agree, you can't get an ought from an is, sure.
But what does that have to do with libertarian "morality" (and how it's allegedly jaundiced)?
Did I even make a moral argument, rather than a practical one? (I mean, I could easily do so, but I was trying to stick to the practical "this isn't actually a problem" one.)