[Animats]

What he's missing is that scaling started working around 1900, when railroads started consolidating. Railroads were the first businesses that had overwhelming economies of scale. No small co-op could possibly compete. Over the next century, more obstacles to scaling were overcome. Container shipping, freeways, cheap communications, mass market products and advertising, and computers removed the obstacles to scaling businesses up to planetary size.

Why it's the Uneeda biscuit made the trouble, Uneeda Uneeda, put the crackers in a package, in a package, the Uneeda buscuit in an airtight sanitary package, made the cracker barrel obsolete, obsolete Obsolete! Obsolete!

Cracker barrel went out the window with the mail pouch, cut plug, chawin by the stove. Changed the approach of a traveling salesman, made it pretty hard.

Gone, gone Gone with the hogshead, cask, and demijohn, Gone with the sugar barrel, pickle barrel, milk pan Gone with the tub and the pail and the tierce. - The Music Man

[sirponm]

I'm so glad that you mentioned railroads because there is a great book, Railroads and Regulation by Gabriel Kolko about the capitalist anti-competiton regulation of the railroad industry that caused their concentration. If you wanna read about it, an essay about it is called "Big Business and the Rise of American Statism" inside of Markets Not Capitalism (freely available online). I'll summarize what it says tho:

Every time big railroad magnates tried to form a cartel to fix prices, a smaller competitor would lower rates and steal all the customers; freight rates went wayy down in this time period. The big railroad owners (like JP Morgan's clients) lobbied for the ICC not to regulate them, but to regulate their competitors. They wanted the government to make price-cutting illegal (calling it rebates or discrimination).

Regarding sanitary packages, the essay _also addresses this_: the big Chicago meatpackers supported regulations because the compliance costs were so high they drove small local butchers and slaughterhouses out of business. The "sanitary" laws were a weapon to kill local competition, not a way to keep food safe

[rickydroll]

I would argue that consolidation happened because rail is a capital-intensive natural monopoly. It's easy to dominate a region just by buying up lines. Smaller lines couldn't steal customers from big players because no other lines were physically able to offer the same service. Trucking is another story. There, the highways are natural monopolies, and trucks are an over-the-top service.

[sophrosyne42]

Before even railroads, the original manufactory boom that is commonly associated with the industrial revolution is the exact kind of case the other poster is alluding to when thinking of large economies of scale. I think Kolko is great to demonstrate that economies of scale aren't infinite, and in the absense of government intervention, market forces actively conspire to ensure firms shrink to their optimal size. But that also proves the flip side: firms will grow to their optimal size too. There is no economic reason to be suspicious of large firm sizes, and the political reasons inevitably hinge on some sort of mistaken assumption of the economics of the matter; anti-trust regulations advocacy is a perfect example of this.

[Animats]

Kolko talks about that in the context of scaling social/charitable solutions.[1] There's a cite to Marshall, who talks about it in an industrial context.[2] But Marshall wrote in the days before computers and the Internet. There was a time when big companies had enormous clerical plants and corporate headquarters operations. Some paperwork and management operations scale O(N log N) or even O(N^2). At some point, corporate overhead became too large.

But we got past that. Walmart, Amazon, Samsung, McDonalds, Starbucks, Foxconn, and BYD all have hundreds of thousands, or even millions, of employees, but don't seem to be hitting scaling limits. There may be an optimal size limit, but it's above planetary scale now. Computers have made this possible.

This leads to monopoly or oligopoly being reached before any natural limit to growth appears.

[1] https://www.jonkolko.com/writing/notes/13

[2] https://www.ebsco.com/research-starters/economics/economies-...

[sophrosyne42]

I am not convinced it is above planetary scale, nor that these are monopolies. For one thing, all the companies you named have competitors, and no company has a distribution center or restaurant in the arctic. There are plenty of other more populated areas that those companies do not serve. Administrative work still requires overhead, and the internet does not remove that burden, otherwise companies wouldn't be scrambling to invest in AI which they expect to reduce this overhead. AI wont entirely remove the administrative overhead either; there are hard economic limits to the efficiency of a bureaucracy.

But more to the point, consider what you're saying. Is the world, viz-a-viz these companies/services that you refer to, worse off than before the internet? Obviously not. In fact, it is substantially better, because higher economies of scale mean mass production for mass consumption. There would be no way you and I could converse this way on our phones without the hyper extensive scaling of production caused by capitalism. This calls into question the concern over scaling. Large scaling and less firms is preferable when they perform a social function.

If co-ops were replaced by big business, this is something everyone should be grateful for. To go back to the industrial revolution example, there were a form of early mutualist co-op that dominated the non-farm market in the pre-capitalist era: the guilds. And the guilds had a stranglehold on handicrafts, apprenticeships, and all manner of specialized production. In order to increase guild profits, the guilds, through their noble patrons, regulated and limited production of all kinds, who was allowed to sell their craft, and all while being worker-owned. And yet these guilds were the true monopoly: they used legal privileges granted through lobbying to the kings to limit production and raise prices. Their products were exclusively for the wealthy and privileged. On the other hand, it was the capitalists that found a loophole in this system that condemned people to poverty and starvation: the mass production with unskilled labor by manufactories. And, through the manufactory system, they smashed the guilds, producing tons of goods for the everyday man, contributing greatly to the prosperity over and above the medieval system that we see today.

[DiscourseFan]

But they did have the unintended consequence of keeping food safe.

[sirponm]

Allegedly. And just so happened to create a massive cost barrier to competition from smaller companies.

[IAmBroom]

There's a mountain of data gathered over decades behind that "alleged" assertion.

[sirponm]

Oops I forgot to respond to the other things you mentioned. That list of removed obstacles is technically correct, but it misses that those things were mostly subsidized

1. Regarding transportation, the interstate highway system and the containerization infrastructure (ports, dredging, naval security) were massive state subsidies to long-distance distribution. If Walmart had to pay the full property tax and maintenance cost of every mile of road their trucks used, their economies of scale would evaporate instantly. The state artificially lowered the cost of long distance shipping below the cost of local production. That isn't efficiency, but the taxpayer subsidizing the inefficiency of moving a toothbrush 3,000 miles. (Carson called these "diseconomies of scale")

2. The Uneeda Biscuit era of mass production created a crisis in that high fixed costs meant factories had to run 24/7 to be profitable, they couldn't wait for orders but had to force product onto the market. This required the state to intervene again via imperialism and arguably the creation of a consumer culture to absorb the surplus in the form of advertising and other means.

3. Computers are the most ironic part; Computers and CNC tools actually destroyed the rationale for the large factory, made it possible for a garage shop to produce with the same precision as a General Motors plant ("Homebrew Industrial Revolution" book by Kevin Carson again which in my mind is not one of his most defensible but it's still interesting).

I would argue that IP was the main reason that small shops didn't take over. As physical capital costs dropped, the state ramped up IP laws (patents/copyrights) to protect corporate hierarchies from the decentralization computers should have caused. I think that Big Tech isn't Big because of hardware efficiency but because of the state-enforced monopoly on information

[WalterBright]

> If Walmart had to pay the full property tax and maintenance cost of every mile of road their trucks used

There's everyone else who uses the road, too.

Lots of railroads were built with private money for various purposes.

These days, even the government doesn't seem capable of building railroads. There's Caltrain, and in Seattle it's taking decades to build a few miles of light rail, at a cost that exceeds the GDP of Norway. Well, maybe not quite that much (!) but it sure seems like it.

[sirponm]

Walmart uses it a lot more than I do. Civeng principles show that road damage rises to the fourth power of axle weight, a fully loaded tractor-trailer does roughly 10k times structural damage of a passenger car but they definitely don't pay that amount.

And yeah the government is consistently incompetent. But there's no incentive for them to be competent in the first place. Either a mostly exempt-from-competiton company does it badly or a fully exempt-from-competition state does it badly in our system.

[WalterBright]

I know about the fatigue damage problem, and have advocated that higher taxes should be put on the trucks.

Anyhow, the most efficient travel for freight is by rail. But due to all the mismanagement by the government, it remains cheaper to ship by truck. You cannot really blame capitalism for that.

[IAmBroom]

... until you realize that the government is just reacting to lobbying by trucking concerns, which are driven by capitalist greed.

[WalterBright]

The failure of government is a failure of government, not capitalism.

[rickydroll]

Railroads are a natural monopoly, as are highways, power lines, last-mile internet, etc. Once you have a railway in place, it is rarely profitable to have a single competitor, let alone the three or four you would need for a genuinely competitive market.

[WalterBright]

Railroads, like airliners, form a network. There are multiple paths to the same destination. There are also competitors in the form of waterways, air corridors, and highways.

Before the government began regulating the railroads, this is exactly what happened (though no air corridors then!).

Power lines also form a grid, and can route around failures. The power to my house got a lot more reliable when the other side of the neighborhood got connected to the grid.

When the power does go down, so does the cable internet, but the internet still works because the cell towers take over the last mile traffic. There's also Starlink.

[rickydroll]

One would think it's the same, but it's not. Each leg of a route is unique. Travel time, distance, and stops on the way. They are not interchangeable.

Practical example: a former customer of mine had a specific route carved out for transporting fruit and vegetables from the West Coast to the East Coast. They had exactly one time slot in the day they could take, which brought the travel time down to about 3-5 days. If they missed that time slot, it was up over 10 days. If one of the route segments was out of service, it could have been two weeks or more. Yeah, you could get from point A to point B, but the time made the alternative routes unacceptable.

The power grid is not sufficiently redundant to protect against many forms of damage. Find power substations and count how many 10 kVA lines feed each substation. Then ask yourself, what happens when that substation goes down because a good old boy decided to take potshots at the transformers? When there's a natural disaster like a winter storm here in Boston, there are a lot of power outages, indicating that the grid is not a grid but a lot of branches.

As for the last mile, no, cell towers don't take over for my FiOS fiber when it fails, nor does Starlink. Cell, fiber, cable, and Starlink are not expanding the market for internet access. The cable market, the internet end-user market, is mostly saturated. Users switch but do not duplicate the service.

FWIW, this is another example of you never eliminate single points of failure, you only move them.

[WalterBright]

Oh, I agree that alternatives can cost more money, but they are still there.

Roads go out or are down for maintenance. People use alternate routes. Happens all the time.

And yes, the last time the power went out at my house I connected to the internet via cell phone. Google says that Starlink provides internet access.

P.S. I also have a generator, as do my neighbors, because the power grid here is unreliable. Alternatives exist.

[gsf_emergency_6]

On the East Coast, the NYC subway could be one example of enshittification running the course. It started with competing private companies.. now if they'd go into real estate like the Tokyo metro

[gsf_emergency_6]

IP has subtle things going against it, which you should certainly analyze more.. eg University research teams have IP too, but no clear network effect (maybe even an anti-network effect?)

To me the overall "anti-network effect" for Big Tech looks like the metatheory Krugman proposed to explain enshittification. The initial ramp up can come from proprietary code, hiring power, regulatory capture, branding, anything really, but especially a synthesis of all these

https://paulkrugman.substack.com/api/v1/file/7510035f-d377-4...