Tag Archives: monopoly

A railroad merger that would stop Chicago area practice of freight handoffs between railroads

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A proposed merger between Union Pacific and Norfolk Southern railroads would end a long practice of railroads meeting in Chicago and then moving their freight from one provider to another:

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Starting in 1848, railroads raced to make Chicago the preeminent commercial and financial crossroads between booming factories on the East Coast and voracious markets and vast natural resources in the West.

But they always found it easier and cheaper to hand their freight off to each other in and around the city than to build transcontinental railroads that actually passed through Chicago. In some yards, including near McKinley Park 4 miles southwest of downtown, Union Pacific and Norfolk Southern exchange groups of railcars. Elsewhere, they hand off individual shipping containers to each other and to different railroads.

By running a single transcontinental railroad, Union Pacific says it can shave one or two days off the full week that 40-foot shipping containers now spend traveling from Los Angeles to Chicago and then on to, say, the western suburbs of New York City…

With a unified rail network, Union Pacific hopes to eliminate hundreds of rubber-tire container moves each day in and around Chicago, and hundreds more between Chicago and surrounding Midwest cities like Detroit; Columbus, Ohio; and Louisville, Kentucky.

There must be more to this story. How much of this has to do with the history of when railroads were founded and which areas they serviced? How much of this is about the railroad industry and companies working together and/or competing? How much of this is due to policies about railroad mergers?

In many industries, the trend over time does seem to be consolidation among the more powerful actors. This might appear to occur for good reasons, such as being able to ship goods through Chicago from coast to coast on one railroad system. But, as the article notes, this then affects markets, prices, and consumers with fewer companies.

At this point, the railroad industry in the United States is nearing 200 years old (1826 might be the first year of commercial operation). This is a long history compared to numerous other commercial or industrial sectors in the United States. What would it take to truly transform the railroad industry at this point as it operates in a much different context than it did when the first companies were founded? Railroads are an important part of the infrastructure of the United States and making it 200 more years might require foresight and adaptation.

NIMBY wins by reducing the number of residential units

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One observer discusses how NIMBY efforts reach their goals:

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Sometimes working together, sometimes working separately, NIMBYs have manipulated a web of local laws and requirements—such as exclusionary zoning, minimum lot sizes, and parking minimums—to reduce production of homes. As with any production cap, the result is higher prices for new residents and higher profits for incumbents, and a transfer of wealth and power from buyers and renters to existing owners.

The article places this in the context of antitrust efforts. Local residents and officials are able to operate a monopoly with local land and regulations, thus limiting any competition. Loosen the monopoly’s hold, others can promote and build housing, and housing prices might be more reasonable and more units are available to those who could not otherwise more there.

In the suburban context, one of the reasons Americans tend to like suburbs is because of this local control. They want to buy a home in a community, enjoy the benefits of that community, and then see their property values appreciate as they are there for a while. More housing units is perceived to do multiple things: (1) threaten the amenities of the community – through density, traffic, new residents, etc. and (2) threaten property values.

The author describes efforts in Washington state to counter local NIMBY efforts. It sounds like efforts at the state level changed what local communities could do. It remains to be seen how much local change will now occur and it is not clear how many states would be willing to go as far as Washington. How many local residents would support state-wide efforts that could overrule community interests regarding housing/

Monopoly, racism in Atlantic City, and ongoing effects

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The board game Monopoly papered over racism and residential segregation in the city and its legacy in that city and in New Jersey is ongoing:

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For white Americans, “Atlantic City, like all mass resorts, manufactured and sold an easily consumed and widely shared fantasy,” Bryant Simon, a history professor at Temple University and the author of Boardwalk of Dreams: Atlantic City and the Fate of Urban America, told me. “Southernness is used to sell that fantasy in the North,” he explained, pointing to marketing that focused on the stereotypically white, southern luxury of hiring Black laborers to shuttle visitors around in rolling chairs, wait on their tables, or otherwise serve them. Jim Crow, Simon said, existed everywhere. Around the time that Monopoly was taking hold in Atlantic City, ballots there were marked “W” for white voters and “C” for “colored” voters, Simon said. It would take countless demonstrations and protests and a long struggle by the city’s Black residents to secure their civil rights, but the Monopoly board records a world of ubiquitous racism.

Although Black residents and tourists could work at hotels such as the Claridge, between Park Place and Indiana Avenue, they were not permitted to dine or lodge there. Some hotels even offered white guests the option of having only white workers wait on them. Black employment was largely limited to the tourist industry, as political and municipal jobs were reserved for white residents.

Atlantic City’s Boardwalk staged minstrel shows, but Black people were largely barred from attending any form of entertainment on the famed Steel Pier. Schools in the area were segregated, clerks at many hotels did not check in Black tourists, and what antidiscrimination laws were on the books were not enforced, Simon said. If Black residents were found to be on a beach that wasn’t designated for Black patrons only, “it wasn’t just like they were run off,” Simon said. “They would be arrested. The police enforced segregation in the city.”…

The impact of the decisions made during Monopoly’s heyday is still felt today. Atlantic City is a “redlined epicenter” of the state, according to the New Jersey Institute for Social Justice, and it leads the state in foreclosures. The rate of white homeownership in New Jersey stands at 77 percent, but Black homeownership is scarcely half of that, at 41 percent. A typical Black family in New Jersey has less than two cents for every dollar of wealth held by a typical white family.

Monopoly is meant to be fun. Until it is not quite the same when we know more about the city behind the game. The game ignores the racial and housing discrimination elements of real life while the winner is a good capitalist who rode real estate luck and development to the top. Few, if any, games deal with this dimension of social life even as the patterns are long-established.

Similarly, the effects of these past actions are long-reaching. The wealth gap in the United States as a whole between white and Black households is roughly 9-10 to 1 so this larger gap in New Jersey is even more troubling. The state also has a long legacy of limited affordable housing as well as racial tension, illustrated in the Mount Laurel case and ongoing clashes in suburbia (see examples here and here).

Creating the antidote to Monopoly may only be able to go so far to remedy the historical record and improve conditions in New Jersey. Yet, at least knowing that there is more behind the story of Atlantic City and those who were not intended to be included in the game can help us remember which narratives carry the day – and which others could.

Board games that teach about housing discrimination

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Americans may like the real estate game Monopoly but it lacks one real-life phenomenon that a few games over the years have included: housing discrimination.

The Pop-Up City blog drew our attention last week to a great project from Toronto artist Flavio Trevisan, who has created a board-game-as-artwork enticingly titled The Game of Urban Renewal (OK, this is enticing to us, at least). The project reminded us that there is something of a history to board games dramatizing low-income and discriminatory housing policy. An earlier such game – one that looks like an antecedent to Trevisan’s, although he had not heard of it – makes a brief cameo in the House & Home exhibit currently showing at the National Building Museum.

That 1970 predecessor, called Blacks & Whites, was produced by the magazine Psychology Today, and was created to teach white players about what life was like for blacks in an era when all the housing rules were stacked against them. Not surprisingly, Blacks & Whites never went mass market (it doesn’t even appear to have gotten enough traction to have widely offended racists of the era)…

If you visit the exhibit, the game garners only a brief mention (and scanned image). But the most telling details are on the board itself and in the instructions. Blacks & Whites is organized like a Monopoly board, with properties increasing in value as you move around it. The property clusters have fantastically blunt names: the “inner ghetto,” the “outer ghetto,” “lower integrated” and “upper integrated” neighborhoods, “lesser suburbia,” “greater suburbia,” “newer estates” and, lastly, “older estates” (namely, Bethesda and Georgetown!). The board mimics the concentric housing rings of many cities as you move out toward the suburbs, from the all-black “inner ghetto” to the all-white “older estates.”

According to the instructions, the game tries to emphasize “the absurdities of living in different worlds while playing on the same board.” “White” players get a million dollars from the treasury to start the game; blacks get $10,000, and they’re restricted in where they can buy properties. Blacks and whites also draw from separate opportunity card decks.

You mean Americans don’t want to be reminded about social ills when playing their board games? At the same time, I bet it could be done if the game properly balanced between playability and concept. Pedagogically, games can be a great way to teach. By putting players into new situations and showing them what it takes to win and lose, certain values can be imparted. This reminds me of George Herbert Mead discussing how children learn about social interaction and adult life through playing and creating games and debating rules. These games also sound similar to social simulations that are occasionally used in classrooms or by some groups. Think of Monopoly: it is a game yet it also could be viewed as expressing some of the basic values of capitalism. In contrast, more recent Euro style games are built around different concepts. Perhaps some enterprising sociologist can properly achieve the gamification of an important social issue.

Now that I think about it, imagine what Simcity could be like if it had a more complex societal element. The biggest social issues that come up in Simcity are crime, education, traffic, and pollution yet there is little about social class (though one can build low, medium, and high rent residential, commercial, and industrial properties), race, immigration, discrimination, and religion/ideological differences. Similar to Monopoly, the game is geared toward accumulating higher levels of money and land values. Perhaps all of these real-life issues would be difficult to model but I bet it could be incorporated into the gameplay.

Should kids be playing Monopoly rather than Settlers of Catan during this economic crisis?

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This Chicago Tribune article rehashes an argument I’ve written about before: a newer set of European games, epitomized by Settlers of Catan, allow all players to build and compete in a way that is quite different from classic American games like Monopoly or Risk where one players crushes the others. However, Monopoly defenders say the classic game may just be the perfect game for our troubled economic times:

Games like Monopoly and The Game of Life and upstarts such as Settlers of Catan come with powerful lessons about personal finance, experts say. Just don’t expect the experts to agree on which lessons are best.

University of Texas at Austin professor Daniel Hamermesh said he demonstrates in his introductory economics class the concept of diminishing returns through a Monopoly property deed…

The game [Settlers of Catan] involves a bit of nation-building. Players are settlers of a new land and trade for commodities like sheep and lumber as they build roads and towns, but no one is eliminated during play.

The whole idea irks Orbanes, who believes that the lessons of the traditional games — there is one and only one winner in the jungle — are being lost.

Here is a summary of Orbanes’ perspective: in a cutthroat world, game players, particularly younger children who are learning about how the world works, should practice being cutthroat. Games like Settlers of Catan are not realistic enough for an economic world where everyone does need to fight each other.

This all sounds to me like it could be another generational argument: the younger generations are too soft as they play games where “everyone is a winner.” It could also be that Orbanes thinks that a classic piece of Americana is being lost – Americans once flocked to Monopoly during the Great Depression but aren’t turning to it during this period. Or perhaps he is motivated by business: these European games are taking away market share from American games in a sector that has had some difficulty in recent years.

Regardless, he is right to suggest that games and play can teach kids and others about cultural values. This article hints at a larger cultural argument that we could have: should kids learn about teamwork or winning?

The quality of music in a post-Napster world

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David K. Levine over at Against Monopoly pointed me to a recent paper (PDF) by economist Joel Waldfogel at the University of Minnesota titled “Bye, Bye, Miss American Pie? The Supply of New Recorded Music since Napster”.  As the title implies, Waldfogel investigates the effects of Napster (and its file-sharing progeny) on the music industry:

Economists generally agree that monopolies are bad. Governments grant some of the basic textbook examples of monopolies for intellectual property, in the form of patents and copyrights. Their bad effects – allowing prices above marginal costs and therefore restricting the supply of output – are thought to be justified by their incentive effects on production. But apart from introspection and anecdotes, we don’t really know much about the effects of remuneration incentives on production in the music industry.…Does the prospect of greater rewards bring forth more music? If so, then the past decade, when the ability for sellers to generate revenue from recorded music has fallen as much as half, should be a dry period for music. This is the question we address in this study. [emphasis added]

Noting that other studies have found undiminished musical output (in terms of volume) in the post-Napster world, Waldfogel attempts to measure musical quality using “a time-constant quality threshold based on critics’ retrospective lists of the best works of multi-year time periods”:

Using indices collectively covering the period since 1960, we document that the annual number of new albums passing various quality thresholds has remained roughly constant since Napster, is statistically indistinguishable from pre-Napster trends, and that album supply has not diverged from song supply since iTunes’ revival of the single format in 2003. We also document that the role of new artists in new recorded music products has not diminished since Napster. [emphasis added]

Waldfogel’s findings will unquestionably prove controversial in many circles.  And, to be sure, copyright policy may be based on considerations other that mere economic efficiency (e.g., John Locke’s labor theory or artists’ moral rights).  If Waldfogel’s findings are verified and generally accepted on their own terms, however, the economic policy implications seem clear:

It is easy to see that file sharing simply increases welfare. Producers lose, but their losses – when consumers steal things they used to pay for – are all transfers to consumers, who now enjoy greater surplus (the price they had formerly paid plus the former consumer surplus). In addition to the transfers from producers to consumers, file sharing also turns deadweight loss – circumstances in which consumers valued music above zero but below its price and therefore did not consume – into consumer surplus. In a purely static analysis, eliminating intellectual property rights benefits consumers more than it costs producers and is therefore beneficial for society.

Internet competition

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My friend Adam Holland pointed me over to Galen Gruman’s article at InfoWorld, which points to the problems that arise when carriers have considerable pricing power:

Users are being forced to sign up for separate data plans for each device. The cellular carriers advertise their data plans in data buckets, such as $25 for 2GB of iPad usage at AT&T and $20 for 1GB of iPad usage at Verizon Wireless. But you also pay separately for access on your iPhone or other smartphone. That means multiple-device users are asked to pay a lot more, forcing most to make a choice between the two.In both cases, the pricing is illogical and punitive. For their DSL and TV services, neither AT&T nor Verizon (half-owner of Verizon Wireless) charges per computer or per TV, but that’s what they’re doing for mobile devices.

Of course, I’m sure that both AT&T and Verizon would love to charge per computer/TV for home Internet use as well (and AT&T is currently in the process of instituting data caps on home users).  As with so many mobile and broadband ISP policy issues, the fundamental problem is that many ISP operate as monopolies or oligopolies.  Accordingly, there are only two major impediments to their pricing structure:

  1. Government regulation
  2. More competition

Government regulation is, of course, is notoriously tricky.  Indeed, it is often counter-productive as established ISPs use vast lobbying budgets in an attempt to regulate any new competitors out of existence.

But more competition is great when it’s possible, and, fortunately, sometimes new market entrants do appear with offerings that put pressure on established providers.  To use a personal example, my wife and I use a Clear Spot for our only Internet service here in the Boston area.  It’s not perfect (ping times are high), but it’s only about $50/month and is fast enough for high quality Netflix streaming.  Moreover, the Spot’s 4G interface/Wi-Fi router allows us to use the Internet within our apartment or anywhere within Clear’s 4G network.  Among other things, this means we can use an iPod Touch “on the go” (just like an iPhone) and “tether” both of our laptops (no additional fee) and connect up to five more Wi-Fi devices (eight total).

Best of all, because Clear’s service is wireless, we don’t have to subscribe to Comcast even though they are the only ISP providing service to our building.  Maybe that’s why they sent us a letter this past week offering cable+Internet for less than $60 a month indefinitely (not as a temporary promotional price).  I guess the market really does work when the market really does work.

Monopolizing orphans

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As numerous outlets are reporting, a federal judge rejected the proposed Google Books Settlement (Wikipedia backgrounder) yesterday, citing a number of concerns:

  1. “Adequacy of Class Notice”
  2. “Adequacy of Class Representation”
  3. “Scope of Relief Under [Federal Rules of Civil Procedure] Rule 23”
  4. “Copyright Concerns”
  5. “Antitrust Concerns”
  6. “Privacy Concerns”
  7. “International Law Concerns”

In this post, I want to comment just on #5 since the court’s discussion of this point focused on the orphan works problem, an issue I analyzed at length just last summer in a journal note (PDF here).

In brief, “orphan works” are creations protected by copyright law but with unclear ownership.  Prospective users of orphan works are in a bind because they cannot ascertain who to ask for permission yet still face the prospect of substantial penalties if an owner eventually surfaces and sues for copyright infringement.  As a result, orphan works remain in legal limbo and rarely are used to their full economic and/or cultural potential.  Orphan works include many (though certainly not all) books that were published during the 20th century (still under copyright) but are now out of print (unclear ownership).

Google sought a way out of this legal limbo so that it could put such books in its database.  Specifically, Google sought to escape the orphan works problem by leveraging the “opt out” structure of this class action lawsuit.  One of the ways that class action lawsuits “work” is by binding a group of people — including those who could have “opted out” of the litigation by filing their own lawsuits but didn’t — to the outcome of the class action.  Here, Google wanted the owners of orphan works (who by definition would not be “opting out”) to be bound by the terms of the settlement.  This would have allowed Google to digitize and distribute those orphaned works.

Writing for the Southern District of New York, Judge Denny Chin expressed concern that the proposed settlement would have given Google too much power over orphan works:

The ASA [Amended Settlement Agreement] would give Google a de facto monopoly over unclaimed works. Only Google has engaged in the copying of books en masse without copyright permission.  As the United States observed in its original statement of interest: “This de facto exclusivity (at least as to orphan works) appears to create a dangerous probability that only Google would have the ability to market to libraries and other institutions a comprehensive digital-book subscription. The seller of an incomplete database — i.e., one that does not include the millions of orphan works — cannot compete effectively with the seller of a comprehensive product.” And as counsel for the Internet Archive noted, the ASA would give Google “a right, which no one else in the world would have, . . .to digitize works with impunity, without any risk of statutory liability, for something like 150 years.”

(internal citations omitted, emphasis added).

While I certainly share the court’s concern with the prospect of a Google monopoly over orphan works, I also find it rather ironic that the court cited monopoly as one of the “problems” that prevented it from approving the settlement.  After all, copyrights are themselves monopolies; they prevent non-owners from using copyrighted works in a whole host of ways (subject to fair use and certain — often technical — exceptions).  Indeed, courts straightforwardly enforce copyright monopolies every time a copyright owner wins an infringement lawsuit.

If monopolies are such a problem, why do we allow them as the foundation of copyright law?  There are policy-based answers, of course, but it seems strange that Judge Chin didn’t engage in any real policy analysis except to say:

The questions of who should be entrusted with guardianship over orphan books, under what terms, and with what safeguards are matters more appropriately decided by Congress than through an agreement among private, self-interested parties.

Of course, many would argue that U.S. copyright law and policy essentially is “an agreement among private, self-interested parties” that simply gets ratified by Congress.  Perhaps the litigants here made the mistake of picking the wrong forum.