Question

Antitrust laws were introduced to ensure fair competition, which will lead (in theory) to the highest level of consumer and producer surplus.

If the government, and through the enforcement of antitrust laws, believes the presence of competition in the marketplace achieves the highest level of market efficiency and fosters economic growth, why do governments have monopoly in providing some services such as DMV offices, professional licensing, business licenses, policing, public transportation, etc.? Is there efficiency in the government monopoly model? Or is there a room for improving efficiency in government agencies? Do you think we will have better public services if the government has competition?

Explain, defend your answer, and give example if possible.

Answer 1

There are cases where antitrust laws have served their purpose efficiently. With competition in the market, the market tends to move towards high efficiency and facilitate growth. To illustrate this I'll provide you with an example of country India, although you must be less aware of the country, I'll try to explain it in a detailed manner. So, India's telecom sector was dominated by only public sector units( i.e. MTNL and BSNL) till the 1990's. After that, the sector was opened up for the private players too. Today India has one of the cheapest rates of internet service in the world, leaving behind almost every developed nation. So this shows how market competition helps in market efficiency and facilitate growth.

But still, the government keeps some sectors reserved for government only because of security purposes. Government not only has the role of facilitating markets but also the national security. Now you might think that private players can also provide security. But the truth is government is the elected representative of the people, which works for the welfare of the people, unlike private players who can sabotage the information or trade the information for money.

One of the reasons for government monopoly is providing welfare, not in the lure of profit, but to facilitate a good life for people.

There are some sectors which require huge investment like railways. But there government use private players for maintenance purposes.

The answer to the question that is government monopoly sector is efficient has a mixed reply as some departments have done a great job in providing efficient work and some not that efficient. There is scope for improvement in the functioning. Like bringing in more transparency and accountability would be great.