Wednesday, October 27, 2010

"Monopolist" Microsoft rapidly losing market share

Cross posted at Mises Economics Blog.

Microsoft is slowly dying as a consumer brand. As recently as five or six years ago, though, left liberals and other anti-business ideologues were still making comments about how Microsoft was a monopoly that was crushing competition in the market place.

The less sophisticated of these critiques centered on nothing more than the fact that Microsoft enjoyed huge market share ten years ago. The more sophisticated critiques noted that Microsoft had been successful at expanding market share through agreements with PC providers like Dell who pre-packaged their PCs with Microsoft software.

Anti-IP libertarians have made convincing arguments about patents, but the IP-loving competitors of Microsoft (and the Feds who make IP possible) hardly have a problem with IP.

None of this behavior around bundling products is remotely "monopolist" of course, since there were no real barriers to entry into the market beyond the fact that people really liked Microsoft's products and weren't interested in going out of their way to get other products. Linux and Apple's OS have always been available for purchase and use. People simply didn't like them as much.

We should mention, of course, that a lot of this anti-Microsoft hysteria came form the early Apple fanbois who saw (and still see) one's choice of computing products as some kind of moral issue. Thus, the Apple disciples never tired of portraying Microsoft as an evil corporation contrasted with the cute and cuddly people at Apple.

Other competitors of Microsoft resorted to monopolist talk also, and Sun Microsystems, which had been producing far less popular products for many years, sued Microsoft for "anti-competitive behavior."

Eventually, the federal judiciary sided with Microsoft's competitors, and federal judges who could not even turn a computer on, started making sweeping judgments about the software industry and computing and forced a variety of reforms in Microsoft's structure to make it less "monopolistic."

In spite of all of these efforts by competitors to use the power of the state to crush Microsoft, Microsoft continued for several years to dominate the computing market with both businesses and consumers.

Eventually, however, Microsoft ceased to be inventive and its browser, operating system and platforms either failed to impress, or were never adapted at all to deal with the new realities of modern computing.

The decline of Microsoft simply illustrates what many free market economists had predicted all along. Namely, that Microsoft, never having been a actual monopolist (monopoly only being possible within a framework of government privilege) would some day fade from view as other, more inventive organizations took over Microsoft's market share.

This happened to IBM, of course. IBM was once denounced as a monpolist, yet today, who could make such a claim without producing smirks in response?

Microsoft's retreat has little to do with the rent-seeking lawsuits levied against it by Sun and others, but has everything to do with the fact that Microsoft hasn't produced any interesting or inventive products in years.

With losing market share, Microsoft is no longer the bogeyman of the anti-monpolist crowd. Now it's Google that is supposedly forcing us all to bend the knee before its monopolist power.

(Better get the federal courts involved, or we'll all be living in Google-owned company towns within a decade!)

Unless they enjoy government privilege, (as was the case with Pan Am under the Civil Aeronautics Board, for example) these alleged "monpolists" come and go, and these reversals of fortune happen all the more quickly in the fast moving technology world.

The fact that Microsoft now struggles to even keep up with the rapidly-changing computing world illustrates just how unconvincing and short-sighted are the claims or monopoly that are usually little more than an expression of personal opinion and self-interest.

Thursday, October 21, 2010

Foreclosure-gate poised to do some major damage

The Market Oracle has a nice and detailed piece explaining the history of mortgage loan securitization and debt collection, and shows how the current crisis has the potential to inflict massive amounts of damage on the mortgage and banking industries.

Here's my favorite part:

Foreclosures can only be done by the note-holder, who has the legal standing to show up in court and ask the judge to foreclose and evict. In about half the states, they have to bring the ORIGINAL (not a photocopy or electronic version) document with "wet signature", so the judge can see the actual ink on paper. They have to prove the chain of title and that they own the note they intend to foreclose on.


Once the people going into foreclosure figure this out, they will stop paying and hire lawyers. Some will keep their homes for free.

Once the people who have been paying their mortgages figure out they might not need to pay, they will stop paying.

Once the lawyers figure this out, they are going to be busy for the next five years helping people sue the banks.

Once the shareholders of the bank stocks figure this out, they will sell the shares.

Once the pension funds figure this out, they will also sue the banks and return their now junk MBS.

Once real estate buyers figure this out, they will stop buying anything with the potential for a tainted chain of title. The foreclosures will stop selling (many already have).

Even the sheriff is figuring this out. What happens when the sheriff refuses to do the foreclosure?

The moral of this story is: If you're buying a house, don't cheap out on your title insurance.

Friday, October 1, 2010

How bad the jobs picture really is

Cross posted at Christian Science Monitor and the Mises Blog:

The people over at the Calculated Risk blog had a helpful post today that links to the BLS's primer on the differences between the "Establishment" employment data and the "Household" employment data.

Economist John Williams has often been referenced on these issues, and his site, is indeed helpful. However, if you want something straight from the BLS's mouth, the primer is very useful.

This will help you understand a bit more about the establishment survey's somewhat infamous "birth/death" model that assumes new businesses (and jobs) are created every time an existing business goes out of business. This sort of modeling, of course, makes employment look better than it is in the current environment.

Calculated Risk also credits a recent blog post by Nancy Folbre that looks at the futility of examining the unemployment rate as a measure of real-world job market health.

While one should always view government employment data with a critical eye, one need not debate the sampling models to see immediately that using the unemployment rate to discuss the job markets rather misses the point.

The unemployment rate is a function of both total employment and the labor force. Indeed, in a sense, it's just the delta between the total size of the labor force and the total number of jobs available.

But how big is the labor force? The labor force size depends on whether a person is actively looking for work or not. So, if a discouraged worker, or say, a recent college grad who hasn't even bothered to look for work given the economic conditions, reveals his or her lack of job seeking, that person will not be counted as a member of the labor force.

So, when we subtract all the older "retired" people who'd rather not be retired, the young people who are ecstatic with an unpaid internship or worse, and all the discouraged workers, we end up with a big decline in the labor force, and this is why labor force participation is at historic lows. As long as that's the case, that delta between labor force size and total employment will be smaller than if those people thought they could find actual full time employment, looked for work, and were counted as members of the labor force.

Folbre's point is that we should look to total employment for a real gut check on how the economy is doing, and not to unemployment. Taking Folbre's advice, we see that there aren't new jobs being created, and all the while high schools and colleges are graduating more and more people every December and every May, and as wages fall, spouses and non-wage earners in single-wage households may have to go out and look for work.

All of this in the face of extremely poor job creation.

Personal Income rises slightly in Colorado, remains in lowest quintile

I've put together this short analysis of personal income totals in Colorado. Income's been increasing, but at a slower pace in Colorado than in most states, and it's not likely that it's driven by jobs and wages.