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CAPITALISM:
A Treatise on Economics

by
George Reisman


The Clearest and Most Comprehensive Contemporary Defense of the Capitalist Economic System Available

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A Brief for Microsoft*

SECOND OF TWO PARTS


By


George Reisman
**

           Federal Judge Robert Penfield Jackson has found that Microsoft’s Windows operating system constitutes a monopoly. Among the remedies urged on the basis of this finding is that Microsoft be broken up into two or more entities, with the entity producing the Windows operating system debarred from producing the software applications that run under Windows.

            It is certainly true that the Windows operating system has the overwhelming bulk of the market for personal computer operating systems. However, it is equally true that the market for such operating systems is legally open to everyone. IBM does offer its OS2 operating system, albeit not very successfully. Similarly, Apple Computer offers a unique personal computer, which comes with its own operating system. Unix and its widely lauded variant Linux are also operating systems available to personal computer users.

            The actual nature of Microsoft’s position can best be understood by asking what would be required for IBM and the others to make significant headway against it. The answer to that question is that they would have to offer applications, such as word processing, spreadsheet, and other programs, some perhaps not yet even thought of by anyone else, that depended on their operating systems and which turned in markedly superior performance to what can be accomplished with applications running under Windows. If they could do that, they would gain substantial acceptance of their operating systems and software developers would be eager to write compatible versions of practically all programs.

            The problem of Microsoft’s competitors is that they do not have anything significantly superior to offer very many of Microsoft’s customers, or, at least, despite often substantial advertising budgets, anything of  whose value they can persuade very many of Microsoft’s customers. In other words, they are unable to compete against Microsoft, not because Microsoft is stopping them from offering something better, but because they simply aren’t offering anything better. In the judgment of the immense majority of computer users, what Microsoft offers is better than what IBM and the others are offering. To say the same thing in somewhat stronger terms, Microsoft has outcompeted the others to such an extent that they now serve such a small percentage of the market that they feel free to turn their failure at competition into a denunciation of Microsoft as a monopoly.

            Indeed, in seeking as a remedy for Microsoft’s alleged monopoly the breakup of Microsoft and the legal exclusion of the surviving branch that would produce Windows from the production of software applications, they seek to totally violate the freedom of competition of Windows. What they seek is a market for software applications monopolized against the competition of  Windows.

            Monopoly does not mean the overwhelming competitive success of one producer. However, it does mean a market legally closed to that producer—a market that is the exclusive legal domain of others, from which the producer who would occupy it under the freedom of competition is forcibly excluded. Such a market is monopolized against that producer.

            It is the apparent intent of Microsoft’s failed competitors to monopolize the market for software applications against Microsoft—to accomplish by monopoly  a total reversal of their failure under the freedom of competition. Everyone who values better software, and, more importantly, everyone who values the underlying fundamental of individual rights and freedom, should strive by all legal means to stop this travesty of justice.


*Copyright © 2000 by George Reisman. All rights reserved.

 

This article appeared on the Editorial Page of The Orange County Register, March 14, 2000.

**George Reisman is Professor of Economics at Pepperdine University's Graziadio School of Business and Management and is the author of
Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996).


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