Benevolent or Malevolent Monopolies Part 2: Government Based Monopolies

Last week we took a look at monopoly as a whole, barely touching on the government’s role in monopoly.  Today, we are going to look at a given government’s role in monopoly, and then examine a few examples from the United States.  We’re also introducing a slightly less well known term, oligopoly.  Oligopoly comes from the Greek words Oligos (few) and polein (to sell).  Today, we use it to describe a market that has few sellers.

How is Government a monopoly-maker?

Government itself has several monopolies that stem from one foundational monopoly.  This monopoly is commonly referred to as a monopoly on the legitimate use of force by the the general (thinking) public, or the monopoly of violence by anarchists.  Put in layman’s terms, the government chooses which uses of force are legitimate and which uses of force are illegitimate through the use of force that it has itself.  It, obviously, sees its own use of force as legitimate.

When I refer to a monopoly on the use of force in this article, I am referring to the aformentioned.

When government uses its monopoly on the use of force to interfere with the free market, there are always winners and losers.  Let’s say I own bank A and Joe owns bank B.  Both of our banks go bankrupt due to bad lending practices.  Because Joe knows governmental officials, Joe is able to convince one of his buddies to pass a law bailing his bank out.  While I lose my bank and life’s savings, Joe is given a couple million dollars that was extorted from the taxpayers.  In short, I learned a lesson the hard way – losing my life savings and business.  Joe had been given a perverse incentive, that of destroying his business, in order to be given millions of dollars in government funding.

We do not believe that the government should be establishing any form of incentives within the marketplace, as the free market creates its own incentives, which are naturally always beneficial for the consumer.

In addition to blatantly fraudulent government interference in the market, there are 3 types of government instituted monopolies/oligopolies: licenses, patents, and tariffs.  We’re going to cover tariffs in part 3 of this series, as they are complex enough to have an article to themselves.


When a government licenses someone to do something, be it by passing a test or completing a training program, it is effecting competition in quite astonishing ways.  While the government may want to educate their employees in a way they see fit, the government has no right to impose their will upon the private sector.

The American Medical Association has to approve every single physician in the United States before that person can call himself a physician.  The government enforces this agency’s monopoly of licensure.  Let’s take a look at the publicly available requirements, taken from the AAMC:

  • 8 years of college, 4 in undergraduate sciences, 4 in post-graduate medical doctoral courses
  • 3-8 years of residency training (apprenticeship)
  • Obtaining an AMA (discretionary) license
  • Re-certification (for the rest of your career)

Anyone else who tries to practice medicine in the United States will be arrested.  While it’s reasonable if the doctor claims to be a Medical Doctor, a classification given by an organization, without that organization’s approval to be charged with fraud, it is completely unreasonable that I could not open up a doctor’s office and allow the market to decide if I was worthy of their business.

While I would not have heart surgery from “Mom and Pop’s Doc,” I would certainly have no problem paying ten dollars or so when I have a minor problem to get what is likely the same direction that I would get from my regular, much more expensive M.D.

Lastly, why should we not have the right to purchase prescription drugs?  That is another part of this government licensed oligopoly.  How many times have you been to the doctor’s office knowing you needed an antibiotic?  How many times have you been to the doctor’s office knowing you needed a muscle relaxer?  Why should you be forced to pay for the doctors’ visit, and then for the prescription?

Hell, for just saying what I said do I need a disclaimer for this article?  Well, just in case:

[This article does not provide medical advice in any way, shape, or form and should not be taken in that manner.  Additionally, this article does not support or advise purchasing anything through a currently illegal channel.  This article is only here to discuss the theory of a free market in medicine and is for entertainment purposes only.  Please don’t sue me 😥 ]

If we did have a free market system, you would have absolutely nothing to worry about if you are satisfied overpaying for doctors’ visits.  I am sure the AMA would still exist and still license people, but many other licensing boards would pop up with much less strict requirements.  The informed consumer would then know when to go to “Mom and Pop’s Doc,” and when to get something they see as serious done by an AMA certified physician.  There may be more boards popping up with higher standards than the AMA as well, so if you are worried about quality of care in the current system, you could go for a more expensive doctor with a better certification.

Medical Doctors are only one example of this.  Take a look at the FCC’s TV licensing in the early days of the organization up until today if you’d like to see another licensing disaster.  Many union professions also have government required licenses.


Now that we’ve looked at licenses, let’s take a look at a specific type of license, a patent.  Let’s get the first argument that people that support patents will always attempt to make out of the way first.

“Patents help innovation by making sure the inventor makes his money before a big company steals his idea.”

Many studies show the exact opposite.  From a 2009 study:

“In PatentSim, we found that the patent system did not work to spur innovation, in fact, participants were more likely to innovate when there was no intellectual property protection at all, or when they could open source their innovations and share them with other people.”

I’d highly recommend reading Stefan Kinsella’s article on the matter if this line of argumentation interests you.

For those of you that are technologically savvy, take a look at Linux’s innovations throughout the years against Unix’s, OSX’s or Windows’.

In our proposed free market system, let’s say I invented a new method of farming that doubled the amount of crops I could yield, but I was not a farmer (if I was a farmer then I could make my money by implementing it before my competitors figure it out).  I could go to Joe the farmer and say: “Hey Joe, you own a large farming corporation.  I can double your output for X down and X in a year if everything pans out.”  Assuming he was interested, you would sign a contract with the terms being whatever they may be, and you would get your payment so long as it worked to the terms of your contract, as contracts between consenting individuals not under duress are enforced by the state.

If you are interested in Intellectual Property, I’d highly recommend Stefan Kinsella’s book, Against Intellectual Property.


I look forward to seeing you guys again for part 3 in this series, on the topic of tariffs and free trade.


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