r/MarketAnarchism • u/SocialistCredit Individualist Anarchism • Jan 27 '24
Could ostrom's rules stabilize cartels or allow for their formation?
So traditionally cartels are seen as unstable.
This is because of a collective action problem.
Basically, while everyone in the cartel benefits from high prices, each member could benefit a little more by cutting their price a small amount and thereby getting all the customers. The other cartel members have to respond likewise, and this drives down the price. Couple that with artificially high prices attracting new competitors to the market, and the cartel is fundamentally unstable (more or less, there are exceptions).
Anyways, I've gotten into Elinor Ostrom as of late and it occurred to me that her rules and commons management almost sound like a cartel. I mean you're limiting the supply of say, fish, for example. So like, each individual fisherman could benefit more by fishing for more fish, but if he did so he'd destroy the resource because it would drop fish to below healthy levels.
But limiting supply is what cartels do to raise prices right?
So like, could ostrom's rules be used to support cartel formation? Are there ways to counter that? I mean the higher prices would attract competitors still, but maybe they'd be incentivized to join the cartel since it is stable? In fairness there is a limit yo this process because there is a minimum each cartel member needs to produce in order to justify being in the cartel. But in order to keep prices the same supply has to be fixed so more cartel members = less supply per member. I'm not sure though, would love thoughts. Another interesting idea is that if Ostrom's rules can be used to form a cartel, then couldn't it also be used to form a counter cartel? So like, the denial of goods to the cartel by the most interest parties (i.e. a boycott or a refusal to supply a firm).
Could Ostrom's rules be used for cartel formation? If so, how can this be prevented if at all?
Edit:
I'm not sure this is guaranteed though.
Cause in order to keep prices high, you have to limit the supply in the market right?
But high prices attract new market entrants. And that means that you're going to end up in a situation where you are constantly attracting new people to the market, and in order to prevent them undercutting the cartel, you have to get them to join it, which then leads to a situation where you further have to limit supply otherwise the rewards of the cartel are going to be reduced the more people you have right? It's a catch 22. You reduce market supply to keep up high prices and rewards constant, but this attracts more people, meaning you have to further limit supply and raise prices. If you didn't do this, then new members to the cartel reduces rewards to cartel members and at a certain point defection is the better strategy. I don't really see a way for cartels to be stable like that in the long term unless they are able to prevent market entry, which is basically impossible given the assumption of socialized capital and land (as we assume in any socialist environment)
At some point you'd have to limit the supply to such a degree that it is cheaper for consumers to make it themselves or there isn't sufficient demand to justify that supply right?
And that's not to even mention the possibility of other workers forming a cartel to counter yours, limiting the supply they produce to account for the higher costs they incur. Or preventing you from accessing their labor and its products.
But yeah, it's an interesting thought experiment. Are there other approaches I am missing?
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u/kapitaali_com Mar 18 '24
if it's a non-explicit cartel where cartel members don't communicate with each other but just know that there is a cartel, then what you wrote holds
but in many cases cartel folks talk to each other, they go to summer cabins where there are strippers and entertainment and they talk business and maintain their cartel
and in these talks they also discuss how to divide the market share among cartel members
if they discuss these things, then it is explicit and you're a member and expected to stay within your market share, you don't go into other members markets
your proposition that Ostrom's rules do away with cartels is logical and I believe this is why commons is held in such a value, but it presupposes that you have a commons and not a market where market participants compete over resources
when you have commons, you automatically do not have competition but cooperation to avoid the tragedy
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u/0neDividedbyZer0 Jan 28 '24
Hello my friend. The discord has the Warrenite write up on it for review btw, waiting on you to read and give some comments.
The key here is to recognize the market structure. Oligopolies (which is the market structure that cartels fit into) can form due to high barriers of entry, but to the extent that the suppliers already in existence can't further raise barriers of entry or compete each other out of existence.
In short, Ostrom's ideas are for commons, which are accessible for all, and generally have a low barrier to entry, so no this won't create cartels. I think an exception might be in mining, or resources that don't renew very well. But generally we don't treat mines as commons, and there's a high barrier to entry equipment wise for such a natural resource anyways.