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Monopoly does not necessarily mean extra economic rent

Comments on Paul Hubbard "Chinese industry: a tale of two sectors", 17/12/2015

In modern economies, the existence of monopoly companies, regardless they are public-owned or private-owned, does not translate to monopoly profits. Utility industries have more monopoly companies.

The reason for that is the regulation of monopolies.

For example, water supply in the ACT, Australia, has been provided by Icon Water, part of the Actew Corporation. The price of water supply is determined by the Independent and Competition and Regulatory Commission, a statutory body.

Further, Actew is owned by the ACT government.

The author also stated that:

"High profit margins from the former (oil industry) compensate for wafer thin margins in the latter (electricity). And at both ends of the spectrum, prices are still determined by state policy, not driven by market competition. Deregulating prices remains a work in progress."

What it says is that there may be distortions in those two sectors in that the price may not reflect accurately the costs. But it is a different matter that there are economic rents that the state is getting from its monopoly SOEs.

So I find the following statement hard to understand:

"Monopoly conglomerates couple the opportunity to extract economic rents with the capacity to control a nationwide bureaucracy."

While the author did not seem to measure, a more important issue is how efficient of the SOEs, given that many argue that they are less efficient.

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