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[Glowcat]

Here's how it'd go:
1.  Dude gets loan, which bank will gladly give out because it's a certainty that RM will pay enough to cover the interest
2.  Dude sets up shop
3.  RM buys shop for a sum large enough to cover loan interest plus substantial profit to dude (because why accept the offer otherwise?)
4.  Dude laughs all the way to the bank

Lather, rinse, repeat.  Your hypothetical scenario fails. 

That isn't how driving somebody out of business works... Starbucks doesn't eliminate their competition by going around purchasing other coffee shops.

Flare's town example probably isn't good though, as a small group of people is easier to organize towards a cause such as buying from a local butcher to ensure long-term meat supply. Even if Murdoch brings in his propaganda arm it's pretty much impossible to hide the negative effect his business was having on the locals because it's out in the open.

[GlyphGryph]

Starbucks competition doesn't attempt to not sell coffee.

Seriously, though, making a point of buying out anyone who becomes a competitor is the perfect way to guarantee you get lots and lots of competitors. This is a thing that actually happens in the market.

Going with:

making their own butcher's shop with ridiculously low prices and higher quality than the independently owned shop can drive them out of business pretty quickly.

This is true, but it is better for the town, arguably! If its cheaper and better, why wouldn't it be? The town would still be bleeding him dry constantly - he's spent tons of money on businesses in town, meaning the town owners now have a ton of money to invest in new businesses. He's created a situation where people perhaps by a lot of meat from him... but at a higher quality and cheaper than they otherwise could have. He's created a newspaper situation where many people have no interest in buying, which creates a situation ripe for competitors and is still probably a losing business prospect without them.

I'm... not sure I'm seeing the problems with this situation.

[Leafsnail]

Clue: what happens after he's driven everyone else out of business and has a monopoly?

[redacted123]

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[USEC_OFFICER]

He can only maintain a monopoly if he can provide a better service at a cheaper price than any potential competitors. Just having a monopoly won't allow him to keep out all and any newcomers unless he decides to drive them out by using his economies of scale to lower costs and prices. Consumers only benefit from this since it means they pay less. This is all regardless however as in any functioning capitalist system there will be government bureaucracies to prevent monopolies forming.

Wrong. The monoply can be maintained if he lowers the prices below the lowest price that the competitor can. Any lost in profit can then be eliminated with profits from other stores.

So, the process would be:

1. New competitor shows up.

2. Monoply holder undercuts competitor's prices.

3. Loses are negated with profits from other stores.

4. Competitor cannot compete, and goes bankrupt.

5. Monoply holder raises prices back up.

The only way the competitor can actually survive is if they convince the community that they are in that they are somehow morally better than the monoply holder. Else, everyone will go to the cheaper prices of the monoply holder.

[Earthquake Damage]

That isn't how driving somebody out of business works...

He specified that Murdoch does not sell meat to this particular market, so he doesn't out-compete local butchers.  They fill a niche he doesn't even attempt to fill with his vegetarian groceries, so he has no way to run them out of business within the marketplace.  If he uses other (e.g. political) means, then we've abandoned the ideal free market model.  I thought this tangent was about defending that model (because it solves everything, so I hear ).  Meh.

Flare's town example probably isn't good though -snip-

That was my point, more or less.

[Flare]

Spoiler (click to show/hide)

We're talking about a RM that will buy out anyone who would set up a  butcher's shop there. Aside from that, buying up all the livestock farms, or making their own butcher's shop with ridiculously low prices and higher quality than the independently owned shop can drive them out of business pretty quickly.

If you mean he will always, without fail, offer enough money to buy out anyone who sets up a butcher's shop, then he'll go bankrupt and the townsfolk will get rich.

That's partly what I meant but not all of it. There is of course the option to buy them out, but there are other ways to influence the market than that. He could on his own, make a butcher's shop of his own in town. In fact, he could make it right next to the family owned meat shop and provide better service, prices, and quality than they could ever hope for.
He could also just redirect all the meat from the farms to another city or somewhere else. This is not to mention that there are many legal ways of making it very hard for someone to operate a business. Banking, smear campaigns amongst other options like spreading disinformation. Some of these are particularily easy if you own the majority of the news outlets.

But perhaps I picked the wrong industry. Maybe news media and internet providers would be a better model.

Here's how it'd go:
1.  Dude gets loan, which bank will gladly give out because it's a certainty that RM will pay enough to cover the interest
2.  Dude sets up shop
3.  RM buys shop for a sum large enough to cover loan interest plus substantial profit to dude (because why accept the offer otherwise?)
4.  Dude laughs all the way to the bank

1. Dude gets loan, which bank will gladly give out b/c it's a certainty that RM will pay enough to cover the interest.
2. RM sets up his own competition.
3. Drives out Dude's business.
4. RM closes butcher's shop.
5. Everybody not willing to invest in a business against such large opposition. No bank in their right mind would loan out to such businesses if independantly held butcher shops in the town were systematically pushed to bankruptcy.

There's an option that usually comes up when the Dude's business is failing. That is, RM would likely offer some money, not much, but still enough to persuade the Dude to close in the losing battle to cut costs.

And while we can imagine lots of people opening their own meat shops as well as entering the auxilary industries to fuel them. Not many people in all practicality would risk their livlihoods just to make a point. And those that do aren't usually the people whom banks loan out money to.

Also, the same would go for livestock farms, unless he literally owned every edible animal on the planet.  In that case, he has a monopoly, thus market failure.  If he hoards them, market forces don't apply.  Either way it breaks down.

Maybe I wasn't very clea. He wouldn't have to focus on anyone of these excusively, he can of course divide up his approach and make it very expensive and hard for the butcher shop to run, as well as driving customers away through means of information or from his own competing shop. Have you ever seen huge department stores open up and the small town business dry up? In my city, there was this city wide franchise called Lumberland, a Canadian owned company. Since Home Depot moved in, there isn't a single one of them left.

By no means would his aims be absolute, but likewise, no government legislation/ decree of a tryant can be absolute either. Just as the only opposition to RM in the scenario are people with near equal amounts of wealth, the opposition to the government/ tyrant are those with enough power to challenge them. IE. other countries, opposition parties, or enough people banding together to overthrow RM or the tyrant.

[Leafsnail]

A better example would be telecoms, internet access, trains, buses and so on.  It's very easy to get a monopoly on one of those, and pretty hard to break them.

[Virex]

It's not as if all possible laissez-faire-based systems would allow monopolies. Many of them are backed by the idea of a healthy market and monopolies and fixed prices don't make for a healthy market. If anything, under a nightwatch government it could be harder to cheat the economy because law enforcement is pretty much the only thing such a government does (a system that would abolish even that is not laissez-faire, it's Anarcho-capitalism)

[Flare]

A better example would be telecoms, internet access, trains, buses and so on.  It's very easy to get a monopoly on one of those, and pretty hard to break them.

Or workers' unions for a more immediate example.

It's not as if all possible laissez-faire-based systems would allow monopolies. Many of them are backed by the idea of a healthy market and monopolies and fixed prices don't make for a healthy market. If anything, under a nightwatch government it could be harder to cheat the economy because law enforcement is pretty much the only thing such a government does (a system that would abolish even that is not laissez-faire, it's Anarcho-capitalism)

I agree. Ideally, no laissez-faire based system would say they would want monopolies- or at least none that I know of. In most cases, governments must be there to be the enforcer of contracts and to make people and companies to adhere to their promises. In a great deal of the cases, the monopolies can be built upon the legislation of the government. While some might be too quick to point out that governments inherently prop up monopolies because of this, not having any government at all can lead to just as bad a situation. Governing authorities can both prop up monopolies and destroy them. It is not something specific to regulating authorities that they inherently encourage monopolies.

[Bauglir]

-snip-

[Flare]

Laying down infrastructure has always been expensive, and thus has always been a very risky business decision to embark on. I'm pretty sure laying down roads and in some cases public plumbing back then wasn't something very many companies did themselves. But nonetheless I don't think the idea was totally alien to Smith, but compared to today where the technology associated with lifting a satellite into orbit as well as the tens of thousands of industries that are directly involved in the effort, isn't something he would have likely imagined.

[G-Flex]

Ideally, no laissez-faire based system would say they would want monopolies- or at least none that I know of.

That doesn't really matter. The disagreement is mostly that laissez-faire proponents think that monopolies wouldn't happen anywhere, whereas detractors think they would. Of course nobody wants them.

Adam Smith (and most other authors associated with the system) wasn't reckoning on industries with such a huge barrier to entry (Mr. Smith can probably be forgiven since there wasn't as much industrialization when he wrote and so startup costs in most industries were probably lower; just a general impression on my part, though, so I'm not 100% certain on that).

Adam Smith also wasn't against useful government regulation. See: http://economistsview.typepad.com/economistsview/2006/09/the_many_faces_.html

Smith worried about the encroachment of government on economic activity, but his concerns were directed at least as much toward parish councils, church wardens, big corporations, guilds and religious institutions as to the national government; these institutions were part and parcel of 18th-century government.

Ms. Rothschild stresses that Smith was sometimes tolerant of government intervention, "especially when the object is to reduce poverty." Smith passionately argued, "When the regulation, therefore, is in support of the workman, it is always just and equitable; but it is sometimes otherwise when in favour of the masters." He saw a tacit conspiracy on the part of employers "always and everywhere" to keep wages as low as possible.

[Bauglir]

-snip-

[Phmcw]

And don't forget the whole "intellectual property" deal. Those really fuck up competition by turning everything into a monopoly.