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Regulated public utility monopolies are not 'natural'

By Darren Nelson - posted Friday, 27 April 2018

Every Australian business and household is directly and indirectly impacted by the seemingly never-ending rise in public utility prices (including airports, electricity, gas, post, public transport, rail, seaports, telecommunications, and water & sewerage). State and federal regulation of these so called natural monopolies (very worryingly, now including the Internet) in fact virtually "locks in" such an upward trajectory.

Consequently, consumers are paying a pseudo-tax that is hidden from plain sight. This is in great part due to, as pointed out by economist Ludwig von Mises, that:

No alleged "fact finding" and no armchair speculation can discover another price at which demand and supply would become equal. The failure of all experiments to find a satisfactory solution for the limited-space monopoly of public utilities clearly proves this truth.


A Personal Note
I have worked in and around the regulation of public natural monopoly utilities for almost 20 years as an economist, regulatory expert and project manager.

At first, I believed that such regulation was fair and necessary as well as efficient and effective. The cracks in this belief first started to appear for me in the late 1990s (when I was working for a state utility regulator in Australia). These cracks continued to widen for me as I experienced more and more utilities regulation (plus more and more life) around Australia and then in the UK in the late 2000s.

My time in the UK (plus my frequent travel to the U.S. then and since) blew these growing cracks wide open, along with my eye – as it was in the UK that I rediscovered the Austrian School of Economics.

Ten Catch-22s
Almost everyone outside the world of Austrian Economics, including establishment free-market economists, unquestionably assumes the need for public utility regulation. This is to borrow a buzz word from the Left, unsustainable in both theory and practice, as evidenced by the following ten realities or Catch-22s of public utilities.

#1 Monopolies are unnatural (not natural)

#2 Markets are undefinable (not defined)


#3 Competition is a process (not a structure)

#4 Value is subjective (not objective)

#5 Prices determine costs (not vice versa)

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This article was first published by Master Resource in 2015, and was updated and republished by Liberty Works.

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About the Author

Darren Brady Nelson is an Austrian School economist, conservative-libertarian and Christian who lives in Brisbane Queensland but is originally from Milwaukee Wisconsin.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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