At The Business.
Alistair Darling doesn’t understand tax incidence either and fining Microsoft.
Tags: Timmy Elsewhere
// Feb 28, 2008 at 2:50 pm
“One way to correct said incentives might be to insist that such fines are not an addition to the EU resources: every such fine is paid back (perhaps on a per capita basis?) to the individual citizens. The simplest way to do that would be to reduce the local council contributions by said amount, after all, that money has only come from the pickiing of the pockets of the populace anyway.”
I’d rather see the money go to supporting R&D tax credits in the software industry so that small nimble companies can get some help in developing the products and services.. that Microsoft will steal and .. err.. cut off the air supply.. ah. Hmmn. OK then, give it to local councils who.. will use it to buy dodgy IT software from Microsoft that costs more but the sales people pay better .. err.. kickbacks.. err. Um. OK then, how about we buy gold with it and stick it in a hole in the ground in Switzerland and call it “sovereign wealth”?
// Feb 28, 2008 at 2:54 pm
“breaking up of monopoly behaviour” – I’m actually quite relaxed about monopolies in a completive market like the IT market. A Microsoft monopoly could only exist if the consumer gets what it wants.
// Feb 28, 2008 at 2:55 pm
Remember, Alistair Darling is a law graduate of Aberdeen. He probably did a year of Pol Econ as a student at most. And Ed Balls no longer works at the Treasury while Yvette Cooper, his wife and now Financial Secretary to the Treasury, is probably too busy. Nicholas Stern, chief economic adviser in the Treasury, seems to have disappeared over the horizon.
// Feb 28, 2008 at 3:02 pm
A Microsoft monopoly could only exist if the consumer gets what it wants.
Sorry, you *what*? Training costs and file formats represent a massive lock-in. Companies don’t spend £500 a seat on Office because it’s that good, but because their documents are all XLSes, DOCs and PPTs and because any data monkey they hire will only know how to use Excel. And the £500 is a lot less than the opportunity and financial cost of sending new data monkeys on a training course to use [whizzy Excel competitor X].
// Feb 28, 2008 at 3:18 pm
john b, I’m glad we agree that the consumer is getting what he wants. The advantages you list for purchasing Microsoft Office far out way the £500 cost.
// Feb 28, 2008 at 4:16 pm
But they’re not advantages of MS Office, they’re advantages of a monopoly.
If Thames Water raised the price of water to 10p a litre, it’d still be more cost-effective to use tap water than to shower in mineral water (or “the advantages for purchasing Thames Water water would far outweigh the 10p cost”).
That doesn’t mean that Thames Water wouldn’t be committing a gross abuse of its monopoly power – which is precisely why it’s regulated.
// Feb 28, 2008 at 4:51 pm
Sorry but comparing Microsoft to a government created monopoly is bonkers. Just ask yourself this – why doesn’t Microsoft charge £1000 for MS Office?
Monopolies can be good for the consumer. That is why people choose to buy a dominant product like MS Office for the reason you listed. BUT only if the consumer values it higher than the alternative.
p.s. I’m running Ubuntu with openoffice and firefox.
// Feb 28, 2008 at 5:40 pm
Sorry but comparing Microsoft to a government created monopoly is bonkers.
Water supply was privately created, at least in London – it was then nationalised (and remains regulated after re-privatisation) because it had become a monopoly. There’s nothing legally to stop someone from building a parallel water supply network, but it would be an unprofitable and borderline-loony thing to do. Kinda like trying to market an alternative office suite…
Just ask yourself this – why doesn’t Microsoft charge £1000 for MS Office?
Because that would be the equivalent of the point where mineral water cost the same as tap water? Because it’s worried that if it did, governments would take regulatory action? Probably a bit of both…
// Feb 28, 2008 at 6:21 pm
When and how much is the EU going to fine Germany for continually propping up their post monopoly long after the time it was ruled that this practice should cease?
……I thought as much.
// Feb 28, 2008 at 7:12 pm
john b, you keep agreeing with me and yet I get the feeling you don’t realise you are;)
We agree that:
* Thames Water is a government created monopoly. The price the customer pays is controlled by the regulator.
* Microsoft’s customers value MS Office at more than £500 and at higher prices customers will switch to other providers.
* Microsoft’s dominate position adds value for the consumer by reducing training cost and providing common document formats.
Is it because you think £500 is just too much to pay for MS Office? What would be a fair price? Should a regulator set the price rather than the market?
// Feb 28, 2008 at 9:17 pm
I use Open Office and Google Docs.
There’s no-one forcing people to buy MS Office.
// Feb 28, 2008 at 10:55 pm
“Is it because you think £500 is just too much to pay for MS Office? What would be a fair price? Should a regulator set the price rather than the market?”
Monopolies are bad for companies: they let the company ossify. But monopolies don’t last forever, and when they do it’s nearly always bad for the (ex-)monopoly. Look at what happened to IBM.
The computing world is changing again and Microsoft don’t look fit enough to keep up. Hence Steve Balmer’s chair-chucking paranoia about Google. Hence Microsoft’s desperate pathetic attempts to compete on search.
// Feb 29, 2008 at 1:27 pm
@ Kit: as long as you don’t believe Thames Water ought to have its prices regulated, your position is entirely logically consistent. The point is that there is no difference between TW and Microsoft (“government-created” is a total red herring) – both are now monopolies, and in both cases the only thing that prevents a competitor emerging are the incumbent’s economies of scale. As for an appropriate way to regulate MS – you could go for RPI-X as for UK utilities, or maximum rates of return [on regulated business] as for US ones…
@ AC1: true-ish for light domestic use. Entirely untrue for corporate use. I’ve tried using the Open Office spreadsheet when working from home – Excel it seriously ain’t.
// Feb 29, 2008 at 4:29 pm
john b (and kit should probably take notice):
There’s another rationale for the state’s regulation of rates for the water supply (what we call here a “public utility’). That’s that the underlying resource–the good that’s being distributed–is a commodity, water, that doesn’t actually belong to anyone in particular that could be said, under property law, to have a right to sell it. And, to a lesser extent, a similar situation exists with regard to the “spaces” traversed by the distribution apparatus.
Such monopoly is a more or less “natural” phenomenon.
The same is not true of the Microsoft “monopoly,” which is due primarily to a pre-eminent position in having succeeded in satisfying consumer wants (which wants include the potential advantages of compatibility with as many other users as possible).
It would be difficult–bordering on impossible–to draw up a “price” for the particular good at the heart of Microsoft’s business, i.e., their operating system. Were it not in Microsoft’s interest to universalize their system, insofar as is possible, it is probable that many customers would be willing to cough up substantial multiples of the price they actually pay. In a very real sense, what Microsoft has accomplished (in pursuing their own goals) is to bring enormous “economies of scale” to the world (business, private, and government) at large.
In the rawest human terms, Microsoft’s accomplishement, whether intentional or not, has been the greatest technologic boon to have devolved upon mankind–EVER. Nothing else has ever expanded so greatly the productivity of human labor or the penetrative and fructive capability of human creativity.
Those of you old enough can reflect on conditions of 40 years ago or so. The various tasks that would have occupied the attention of a businessman, a subordinate manager, and a small office–say 4 or 5 clerical/secretarial personnel–can, today, be easily managed by that single businessman himself. E-mail reaches its destination (or multiple destinations) instantly and almost effortlessly, obviating the need for copying machinery, paper, and postage charges. Research of many types can be carried out with a few clicks and, mostly free.
Online financial transactions simplify both private and business life extraordinarily.
One added reflection (which should occur naturally to more people than it actually does):
“if we’ve had such amazing improvement
in productivity, where’s the enormous
visible benefit to almost everyone?”
The answer to that q
// Feb 29, 2008 at 4:42 pm
The answer to that question is not simple. But the primary answer is that much of the greater productivity of those whose productivity has been so dramatically enhanced is, indeed, enjoyed by such persons in the form of more and better appurtenances of ordinary living. But a significant portion is bled off on a continuous basis to fund all those activities of what we call governance, including distributions made in the name of the welfare state. The productivity of hundreds of millions in those portions we call the “developed” nations is simply taken to finance non-productive and even counter-productive activities of officials and functionaries and to support and encourage the idleness (and worse) of a large client class of the non-productive.
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