When Good Guys Undermine Markets

I thought that the past year's events would make libertarian claims about the proper role of government would decline, rather than gain, in popularity.  My pal, lil' Steve, has a good explanation for why it has not worked out as I thought (hint, psychological biases favor the libertarian argument).  So, I have decided to highlight the need for government regulation with a semi-daily story about market failure.

Today's cautionary tale: Apple.  Sure, they have friendly computers and I got great service when my ipod died, but who would have thunk it that the happy-hippie company would use their 69% share of the online music market to try to coerce record companies (or whatever they are called these days) from giving Amazon favorable deals. 

Though the Justice Department’s inquiry is preliminary, it represents additional evidence that Apple, once the perennial underdog in high tech, is now viewed by government regulators as a dominant company with considerable market power.

I love iTunes and I have bought far more music the past couple of years than in the preceding ones.  So, don't get me wrong--the technology is usually quite good and user friendly.  My recent experiences getting service in Apple store were great.  But with great power comes .... great temptations.  Apple has always had to play nicer than Microsoft because it had a smaller market share.  Now that Apple has a big share of various key sectors, it may become more like Microsoft.  And wouldn't that be ironic?

Lesson #1 for those who believe in unfettered markets: not all markets are perfectly competitive or even mildly competitive.  Companies will crave monopoly, and sometimes they get pretty close.  If government does not regulate in such circumstances, will the magic of the marketplace still work?   Um, no.