Adam Li Khan: Breaking Monopolies is One of Government's Most Important Responsibilities

Anne Korin and Gal Luft make a very persuasive argument in their book, Petropoly, that the most influential free market advocates have always been in favor of one particular use of government: To prevent or break monopolies so free markets and competition could occur.

Many people are in favor of fuel competition but think an open fuel standard would be an overreach of government. Korin and Luft's arguments make it clear that nothing could be further from the truth.

Many people believe that the reason other fuels don't compete with gasoline is because they can't — they're too expensive. But this is not so. Ethanol and methanol can both be sold today for less money per mile than gasoline. The only reason people don't use them is because their cars are not warranted to burn them. The engines themselves could burn the fuel. But the cars are warranted to burn one fuel only, regardless of how easy and inexpensive it is to make them capable of burning all three. And that's the only reason fuels are not competing today.

What we have is a virtual monopoly. And since transportation underpins our economy, this monopoly rules our most economically important commodity. What would Nobel Laureate (in Economics) Friedrich August Hayek think should be done about this? He was, as Korin and Luft put it, "One of the greatest economists and political philosophers of the 20th century and the world's leading free market proponent...In 1945, Hayek published his triumphantly successful book The Road to Serfdom, a manifest in defense of markets and competition which made him the darling of conservative parties and leaders all over the world, including Margaret Thatcher."

Hayek said that you can't rigidly stick to rules with regard to free markets, and he named especially laissez-faire as one of those rules you should not be inflexible about. Hayek believed that the government should function as "a counterweight to monopolistic coercion" as Luft and Korin put it. That's exactly what we have in the transportation sector. "Cars that block competing fuels," they write, "are a barrier to the development of a free market in fuels."

Because we don't have any other attractive options for breaking OPEC's monopolistic coercion of our economy, Hayek would probably have wholeheartedly supported an open fuel standard.

Another important and influential free market advocate was also a Nobel Laureate in Economics — Milton Friedman. He wrote that "the first and most urgent necessity in the area of government policy is the elimination of those measures which directly support monopoly."

What is something within our borders that directly supports the petroleum monopoly? The petroleum-only vehicle.

What could eliminate that monopoly? An open fuel standard.

Many people are understandably angry at our government's constant interference and meddling in the free market. But freeing markets from a monopoly's dominance of an important commodity is a good reason our government should intervene. Let's hope this understanding reaches enough people in time.