Economic issues August 2022

Mark McIlroy



This article discusses deregulation, markets and monopolies.


1. A review of markets


In order to operate effectively markets require the following:


a) A large number of buyers and a large number of sellers.

b) Transparency: all bid, offers and preferably transacted prices should be publically displayed.

c) Effective settlement procedures: settlement should be fast, cheap and reliable.

d) Even if all the requirements aboove are met markets have one serious flaw. If availability of supply is slow to change (e.g. mining products), or changes in large amounts (fruit and vegetables subject to weather damage) then prices can move from very high to very low levels and vice versa. This is an undesirable effect and some products are better priced with contracts set at average long-term prices.


2. Monopolies

At the time of writing industries are concentrating and monopolies are growing. This tends to lead to low wages and a large profit share of the economy going to business.

This effect could be countered by laws to assist smaller and start-up businesses, e.g. compulsory payment terms not to exceed 14 days, a ban on business lower prices for buying in bulk.

In socialist societies this effect is countered by wages for each occupation being regulated.



3. Deregulation

Deregulation was supposed to lead to more innovtion for new products and higher wealth for society overall.

Some of these aims were achieved.

However this environment also lead to lower wages.

This effect could be countered by improving the operation of labor market effects (e.g. compulsory disclosure of offered salaries in job advertisements), by regulated wages, and by actions to prevent the dominance of monopolies see above.

Collective bargaining by workers lead to strong wage growth in the 1970's and 1980's, however this effect has reduced drastically, possibly due to increased numbers of workers making it difficult or impossible to bring the group together into an organised action.