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Government-granted monopoly

From Academic Kids

In economics, a government-granted monopoly (also called a "de jure monopoly") is a form of coercive monopoly in which the government grants a monopoly in a product or service to a private individual or firm, and excludes potential competitors from the market by law, regulation, or other mechanisms of government enforcement. As a form of coercive monopoly, government-granted monopoly is contrasted with natural monopoly (in which competition is economically unviable rather than legally prohibited); amongst forms of coercive monopoly it is distinguished form government monopoly or state monopoly (in which government agencies hold the legally-enforced monopoly rather than private individuals or firms) and from government-sponsored cartels (in which the government forces several independent produces to partially coordinate their decisions through a centralized organization). Advocates for government-granted monopolies often claim that they ensure public control over essential industries; opponents often criticize them as political favors to corporations and as distortions of the free market.

Under mercantilist economic systems, European governments with colonial interests often granted large and extremely lucrative monopolies to companies trading in particular regions, such as the Dutch East India Company. Today, government-granted monopolies may be found in public utility services such as public roads, mail, water supply, and electric power, as well as certain specialized and highly-regulated fields such as education and gambling. In many countries lucrative natural resources industries, especially the petroleum industry, are controlled by government-granted monopolies.

Intellectual property protection

Many commentators have also pointed out that what are sometimes called intellectual property laws—laws granting protections through copyrights, patents, and trademarks—represent government-granted monopolies on the copying and use of particular items of information. It's worth noting, though, that intellectual property restrictions are usually motivated by concerns different from—indeed, opposite to—those that motivate other government-granted monopolies. Whereas other government-granted monopolies are usually motivated by a perceived need for greater public control over the accessibility and quality of essential goods and services, "intellectual property" monopolies are usually motivated by a perceived need for greater private control, by an artist or inventor, over the use and profits from their work. Similarly, whereas most other government-granted monopolies are accompanied with extensive regulations intended to prevent the taking of monopoly profits by the monopolist, "intellectual property" monopolies are usually granted with the express purpose that artists and inventors will reap monopoly profits from their work, giving them a greater incentive to persist in creative work, and preventing low-cost unauthorized copies from driving them out of the market.

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