Paging Ida Tarbell; we have new monopolies to investigate

Oh dear. Are we In the Grip of the New Monopolists?

Can you live without Google, Amazon, Facebook and Twitter?

I can't. In fact, I'm hoping they'll help bankroll me for a few years as a blogger.

The problem with these new monopolies - the reason they've become monopolies - is that they provide the platforms upon which so many things now rest. They've made so many of our lives easier, says Tim Wu at Columbia Law School. But what happens if these innovators stop inventing and start working merely to maintain their stronghold over the marketplace?

Here's what Wu says, via WSJ:

"Info-monopolies tend to be good-to-great in the short term and bad-to-terrible in the long term. For a time, firms deliver great conveniences, powerful efficiencies and dazzling innovations. That's why a young monopoly is often linked to a medium's golden age. Today, a single search engine has made virtually everyone's life simpler and easier, just as a single phone network did 100 years ago. Monopolies also generate enormous profits that can be reinvested into expansion, research and even public projects: AT&T wired America and invented the transistor; Google is scanning the world's libraries.

The downside shows up later, as the monopolist ages and the will to innovate is replaced by mere will to power. In the 1930s, AT&T took the strangely Luddite measure of suppressing its own invention of magnetic recording, for fear it would deter use of the telephone. The costs of the monopoly are mostly borne by entrepreneurs and innovators. Over the long run, the consequences afflict the public in more subtle ways, as what were once highly dynamic parts of the economy begin to stagnate.

These negative effects are why people like Theodore Roosevelt, Louis Brandeis and Thurman Arnold regarded monopoly as an evil to be destroyed by the federal courts. They took a rather literal reading of the Sherman Act, which states, "Every person who shall monopolize…shall be deemed guilty of a felony." But today we don't have the heart to euthanize a healthy firm like Facebook just because it's huge and happens to know more about us than the IRS.

The Internet is still relatively young, and we remain in the golden age of these monopolists. We can also take comfort from the fact that most of the Internet's giants profess an awareness of their awesome powers and some sense of attendant duty to the public. Perhaps if we're vigilant, we can prolong the benign phase of their rule. But let's not pretend that we live in anything but an age of monopolies."

Read more: http://online.wsj.com/article/SB10001424052748704635704575604993311538482.html#ixzz15KJtVfUJ