Utilities are a common "proof" people like to give for why government-protected monopolies are necessary. I'd like to take this opportunity to explain why that "proof" is really no proof at all, by working out a number of different examples.
The fundamental problem with a government-protected monopoly is that the monopoly becomes an unelected extension of the government, with a mind of its own. If that monopoly is then given to a for-profit company, we've created what is known in the insurance world as a "moral hazard," in that we're creating an incentive for the company in question to violate the trust that we've put in it.
Roads, by and large, are managed by the government right now, so I don't see why we'd need a for-profit company to manage them instead of the government. I'd just like to point out that selling public roads to private companies to turn into toll roads is unacceptable; if you're taking land from the people to use for transportation networks, people shouldn't have to pay to use them. Roads aren't supposed to make money for the government; they're a service that the government is supposed to provide, in exchange for the tax money it collects.
The rail system was screwed from the start. We were trying to conquer the Native Americans way too quickly relative to our expansion potential, and our government took the cheap way out, giving public land to private enterprises. Yes, the government got plenty of payback, but we the people didn't. I'd give the rail system the road treatment.
There are two legitimate ways of looking at power: either it's a luxury, or it's a necessity. If it's a luxury, then power companies should be on their own, with no government support. If it's a necessity, then a certain amount of it should be provided by the government to each person, and possibly to each company.
Again, if telecom is a luxury, then there's no reason for the government to have anything whatsoever to do with it. If it's a necessity, then the government should be responsible for building and managing the networks. It's totally insane for private, for-profit companies to have a monopoly on public telephone networks. The same goes for cable TV, and for all Internet connections.
The airspace in your property belongs to you, and to nobody else. The government has no right to take it from you and sell it to NBC, Cingular, Newsradio 88, or anybody else. Instead of paying the government all that money for the spectrum, let those companies negotiate with all the people whose property is covered by the intended broadcast areas. Okay, so we probably won't have huge TV and radio broadcast areas; if that's a necessary casualty of doing things right, then so be it, and losing big media is not necessarily a bad thing, anyhow. You also won't be able to get reception on your Cingular phone whereever you go. That shouldn't be a problem, either: Cingular can sign agreements with other companies to make their network available to their subscribers. You may recall "roaming agreements" from the past; they were implemented wrong for various reasons, mostly having to do with the original AT&T landline monopoly, and consumers suffered as a result. Implement them right (which is what would naturally happen in a free market), and everybody benefits.
It's also worth noting, incidentally, that shared spectrum is far more productive than monopolized spectrum, in 20/20 hindsight. Take cordless phones, radio control cars, WiFi wireless networking (802.11a, b, g, and n), microwave ovens, Bluetooth, etc., as examples. All of those operate in a tiny total frequency range, by comparison to, say, broadcast TV; yet, they're able to do just about everything that broadcast TV can do. (They can't yet cover large areas efficiently because there are FCC rules about maximum output power allowed, but innovation has managed to overcome even those limitations, with technologies like MIMO (part of the "super G" or "draft N" you see on wireless routers) and OFDMA (part of WiMAX) being developed specifically for use in shared spectrum applications.) If radio and TV networks were to modernize their infrastructure, in other words, they'd be able to broadcast everything they currently do in a tiny percentage of the spectrum they currently hog, and they'd be able to share it among themselves (and with us, the people), to boot. Also, IPTV technology has been around for ages, now; why not use the TV and radio spectrum for additional Internet bandwidth, and tell radio and TV broadcasters to go online, rather than hogging our airwaves? The media doesn't want to have to do that, because then they'll no longer have government-protected monopolies. See, the status quo is in their best interests, so you're not going to hear my proposal on the radio or on TV, just the same as Congress will never vote its own salaries down. Power corrupts.
An argument can be made that government should provide garbage service. The argument is quite hard to justify in a Capitalistic system, though, since it effectively introduces an unnecessary government-protected monopoly. It makes far more sense for residents to be responsible for their own junk. Let communities form co-ops to collect their garbage into central locations, and then contract with external companies to haul it off to landfills. I find it ridiculous that I should be subsidizing my neighbor, who insists on filling 5 trash cans a week, when it takes me more than a month to fill just one. I'm essentially being forced to foot the bill for his obsession with fancy packaging. If he doesn't care about the environment, let him pay the price all by himself. (Note: Some people seem to be wondering which neighbor I'm talking about. I'm actually not talking about anybody real (at least not as far as I know). While it does take me well over a month to fill a garbage can (I guess it's probably a bit of an understatement to say I'm a tad interested in conservation ... perhaps "tree-hugging hippie with honors" would be more appropriate?), I don't recall noticing my neigbors filling more than a couple a week. Then again, I don't spend my whole life auditing the neighborhood's trash cans. I live my life in whatever way I believe is right, but that doesn't give me a license to force others to live their own lives in whatever way _I_ believe is right. You have a God-given right to the pursuit of (your own) happiness, and if you need to fill 5 trash cans a week to be happy, far be it from me to stop you. Just please don't ask me to foot the bill for you.)
I'm not entirely sure if an organized police force can be considered a necessity; I suppose that's a question that each individual government needs to answer for itself (after consulting its constituents, of course). What I do know is that police forces in small towns tend to be used for things that are easier to accomplish without them, and they waste far too many resources in the process. I see cops standing around 25 MPH roads waiting for speeders, for example. (I see other cops whizzing by them after running a stop sign, too, but that's beside the point, here.) Set up checkpoints at strategic locations, and measure the time motorists spend going between them; if it's too short, don't let them into your town next time without a performance bond to guarantee that they won't speed again. Is there a point in paying that cop a salary, paying for his Crown Victoria plus all the special police equipment that goes into it, paying the auto insurance policy for that gas guzzler, paying for that thing's gasoline and repairs, and paying for the accidents the cop causes by speeding and running stop signs himself? Anybody who's ever been on an Interstate knows exactly what I'm talking about, here. State troopers are easy to tell from a mile away because they're the only cars that go way over 100 MPH for no good reason (and getting to the next ambush point a few seconds earlier is no good reason). If driving at those kinds of speeds is actually considered safe after all, then why were the speed limits set at 65, to begin with? Is some sort of special driving course necessary? Why not force everybody to take it, then, so we can all drive more safely at highway speeds? That's got to be the simplest way to make our Interstates a safer place to drive. (Keep in mind that if cars can safely drive 1.5 times as fast as they drive now, then our current roads can support about 1.5 times as much traffic per minute with no slowdown. In other words, rush hour can all but disappear on Interstates all over my home state of New Jersey, with no requirement for expensive new construction projects (which somehow always seem to land on Bishop, Sanzari, and Kramer) to redo roads, etc. Now, even if cars _can_ safely drive 1.5 times as fast, that doesn't necessarily mean they should; most cars today are built to drive most efficiently at anywhere between 50 and 70 MPH (SUVs even slower), so you'll find yourself at the gas station far more often if you make a practice of driving to work every day at 100 MPH in anything but a sports car. BTW, given the number of high speed miles that state troopers put on their cars, I'm at a loss to explain why they get Crown Vics instead of Camaros; whatever extra you pay on the invoice, you easily save at the pump. The answer, of course, is that we don't get a say in what they drive; we just get to pay for it.) If the cops concentrate on doing their job (to serve and to protect) instead of wasting their time flagging down passers-by to generate revenues for their local governments, then we won't need half as many cops.
A monopoly on the use of force is far too easy for a government to abuse. Increasing government transparency should solve that problem, at least partially.
I have $100. I have a friend with an extra $1, and another friend who'd like to borrow $1. I'm not allowed to offer friend A a savings account and friend B a credit account, because the government says so. That's why friend A can only get a 0.35% interest rate from a local bank, and friend B can only get a 10% interest rate from the same local bank. Clearly, the local bank's actuaries think that about 1 out of every 12 credit accounts will default (since the next 10 will then make up the loss of principle, and the last one will provide the interest payments due to the depositors of all those savings accounts, while leaving a bit of profit for the bank itself). In practice, nothing is quite that simple, because we have tons of rules and regulations governing what banks can and can't do with deposits; we also have rules and regulations about how credit accounts may and may not be managed. Finally, we have a variety of other compliance costs that every bank is forced to bear. We've created an artificial maze that only very large banks are able to navigate efficiently, which is why banks keep consolidating. The banking system should be completely deregulated. Let people decide for themselves where they do and don't want to put their money. Reputable banks will probably get insurance policies (somewhat equivalent to what the FDIC provides all banks, now) to cover deposits, and concerned depositors will ask for proof of insurance before depositing. More adventurous people will seek better interest rate savings accounts at banks without insurance policies, and will live with the consequences of their own actions. (People are already allowed to put their money into the stock market (or into a casino, for that matter) and cross their fingers; I don't see why they shouldn't be allowed to put their money in the hands of a local bank (and cross their fingers), instead.) In the hypothetical example I gave above, for example, I'd be able to offer a better rate both on the savings account and on the credit account, while self-insuring the deposit account in case of a credit account default. The only barrier to me providing that better service at a better price to my friends is that the government says I can't, without going through a mountain of paperwork, proving assets well in excess of what I need, verifying compliance with half a gazillion rules and regulations, and generally increasing my costs of doing business for no good reason. (I'm told that I actually _can_ be a bank, as long as I don't claim to be a bank, don't mislead anybody into thinking I'm a bank, and as long as I don't advertise my services, and as long as I don't violate any other provision of the code (in the opinion of whatever judge(s) I need to deal with). Whatever.) Is it any wonder that a new bank doesn't start up every other day? Now, with this little competition among the few existing banks, is it a suprise that it takes nearly a week to transfer $100 over the Internet between two banks that are only a block away from each other? (Yes, I physically withdraw money from one bank, and then walk down the street to redeposit it at the other, because it's not only cheaper, but faster. In a free market, backward-looking banks like this would never survive.) Get real: EFT (Electronic Funds Transfer) should take a few milliseconds, not a few days. The only reason that it takes a few days is that the only players in the banking game got together and decided not to pass on their savings from using new technology to consumers, and getting more players into the game is ridiculously difficult in our current regulatory framework, so they essentially have the market cornered thanks to a government-protected monopoly. (Lest anybody claim that the technology is expensive, I'd like to point out that the necessary software has been freely available for at least about two decades now, and will run quite happily on very old computer hardware. If the banks really wanted to take advantage of existing innovation, they could've started doing EFT back in 1992, when they were first allowed online. If they wanted to actually innovate themselves, they could've run said software over the telephone networks, even before they were allowed on the Internet. Protected monopolies don't tend to innovate, though, so what were we expecting?)
If we continue awarding government-enforced monopolies left and right, we're going to continue increasing the scope of government, and by implication, decreasing the scope of the free market. Needless to say, we need to fix this problem if we want our economy (which is based on the free market) to move. We need to encourage people to invest in the free market, and shrinking the free market simply doesn't inspire confidence in prospective investors, now, does it?
It's all nice and everything to look at my long-term proposals for getting rid of government-enforced monopolies, but what do you do for all the current government-enforced monopolies? Most of my proposals involve shutting down the monopolies over time, on a case-by-case basis. However, in virtually all cases, new government-enforced monopolies should not be awarded under any circumstances. Once we're no longer shooting at a moving target, we'll be able to start knocking down our current problems, one at a time.
Clearly, for a utility to justify a government-enforced monopoly, it must be a necessity: something that virtually everybody needs, and where either one size fits all, or differences are easy to account for. Most of today's government-enforced monopolies fail that test quite miserably, but the status quo is too comfortable for them, so they'll resist any type of change. We need to figure out which ones are necessary, and bring them under the direct control of the government (so they become subject to the Democratic system, rather than being subject to the shareholder system); we need to figure out which ones aren't necessary, and strip them of their governmental protection. In both cases, we need to phase things in gradually (but deliberately), so we don't upset the system all at once. (We can even do "100 year" plans, in cases where nuking the monopoly sooner is expected to destabilize things too much. A 100-year plan is better than no plan at all.) If we want to lead the free world by example, we need to think long-term; patching today's problems in a vacuum simply won't cut it tomorrow. We eat the patchwork of our ancestors today; do we want our descendants to have to eat our own patchwork tomorrow? At a certain point, it'll be impossible to even go to the supermarket without first consulting your lawyer. (I'm sure the lawyers reading this are chuckling to themselves: "You already do, if you want to protect yourself.") Is that the future of the "free" world? Just take a look at what a library has to go through before it can figure out whether it's likely to be legal to make a backup copy of an old book. (Obviously, the library is always running the risk that a judge will disagree, even after doing all its research, hiring expensive lawyers, etc. Put another way, we've just raised the costs of doing business for libraries, by needlessly clouding the answers to important questions. Legal costs (i.e., needless overhead) only rise, as time goes by. The problem with this type of overhead is that it distorts the foundation of Capitalism, which is that the path to high profits should be paved primarily with hard work (i.e., offering a product or service that there's demand for), rather than external factors. By negligently writing unclear laws, our government has created a liability for everybody within its jurisdiction. Thanks to our politicians' irresponsible legislation, we all have to hire a lawyer as a standard part of our everyday life. If you're looking for a recession-proof profession, become a lawyer: as long as our politicians continue drafting imprecise legislation, you're guaranteed to have plenty of work. You might as well enjoy the Age of the Lawyer.)