Regulatory 101 For Journalists: Meet George Stigler
Enter George Stigler, who published his famous essay “The Theory of Economic Regulation” in the spring 1971 issue of the Bell Journal of Economics and Management Science. The University of Chicago economist reported empirical data from various markets and concluded that “as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.”
The starting position is that monopoly is bad, then, we need to do something, then we employ economists with power to set rules. But the industry has a bigger stake, they will prevail, the regulator fabricates a story of a pseudo market and pretend their rules achieve it. The regulator seldom gets enough power to make a big difference (fortunately) and is always understaffed (they say), the regulated firm pretends to be hamstrung but make monopoly profits as before with even more security now it has government protection. The public thinks the public/ private partnership protects them but the monopoly and its monopoly profit still exist, the regulations usually make it more difficult for other firms to enter. The industry unions soon realize they are a monopoly in a monopoly and cannot resist the temptation to demand more benefits, the company only pretends to resist as the regulator will award higher prices.
The ending position is worse than if government had not intervened, there are more public servants to support, the worst aspect is probably the rigidity built in to the industry.
Conclusion- Even if monopolies are bad, it has to be the case that government intervention will make it worse.