Occupational Monopoly

Felix Salmon makes a good assessment of the Private Equity growth in recent years. The real generator for taking Public companies Private comes for the Tax loopholes currently written into law. Sharp Accounting practice can translate almost all Income into Capital Gains taxed at much lower rate, then defer payment of such taxes for sufficient period to double or triple the total Profits in excess of the owed taxes. Private Equity Managers pay only such taxes as they must to possess the funds to life maintenance for themselves. Most Economists would say this is good business, but it is not if the Debt load which those deferred taxes were to reduce doubled or tripled in size. Is this the basic malfeasance of Private Equity Business? Only to the degree that they lobbied for the Tax loopholes. The real corrupt intent lay in the legislative bodies, who turned these Tax loopholes into law.

Chris Dillow wonders whether high Profits actually are a good measure for economic performance. He mentions that high Profits are a sign of monopoly power and lack of competition. He sees this as the result of overgenerous Government regulation which gives Workers and Consumers a bad deal, and leads to market inefficiency. I feel it is a greater and more personal effect, which I call Occupational monopoly. One does not hear of Doctors, Dentists, Lawyers, Engineers, and Plumbers entering into Price competition to garner Customers. Many of these Classes of professionals do pro bono work, and even provide a Two-Price system for preferred Customers; but One never hears any public advertizement of such effect. Any deviancy from such practice leads to ostracism in the field involved.

The very silence in such Marketing about good deals expresses both the existent power of monopoly in these Professions, and cause Markets to adjust to the known Prices charged in the Occupational division of labor Wages. Such effect on Markets could be seen in the Automotive industry in reverse, where Advertisements always listed the rock-bottom lowest Prices for vehicles; but actual Price increased with any added adornment past a total stripped-down Model. Silence is Golden, but as far as Professional Occupational speciality, it causes almost a 30% increase in Prices for about 70% of the Consuming Public. Realistic evaluation would state that Prices would increase about 5% above the preferred rates for about 70% of the occupational Customers, if the Marketing was efficient with informed Customers. Lgl