how legal monopolies work
a legal monopoly is initially ordered because it is perceived as the best option for both a government and its citizens for example in the u s at t operated as a legal monopoly until 1982 because it was deemed vital to have cheap and reliable service that was readily available to everyone railroads and airlines have also been operated as legal monopolies throughout different periods in history a legal monopoly materially differs from a de facto monopoly which refers to a monopoly that is not created by a government entity the prevailing idea behind instituting legal monopolies is that if too many competitors invest in their own delivery infrastructure prices across the board in a given industry would climb to unreasonably high levels while this idea has merit it does not sustain itself indefinitely because in most cases capitalism eventually wins out over legal monopolies as technologies advances and economies evolve playing fields typically level out all on their own consequently costs drop and barriers to entry diminish in other words competition ultimately benefits consumers more so than legal monopolies do examples of legal monopoliesthroughout history various governments have imposed legal monopolies on a variety of commodities including salt iron and tobacco the very earliest iteration of a legal monopoly is the statute of monopolies of 1623 an act by england s parliament under this statute patents evolved from letters patent which is written orders issued by a monarch granting title to an individual or a corporation the dutch east india company british east india company and similar national trading companies were granted exclusive trade rights by their respective national governments private freelance traders operating outside the scope of those two companies were subject to criminal penalties consequently those companies fought wars in the 17th century in an effort to define and defend their monopoly territories legal monopolies on alcohol remain fairly common both as a source of public revenue and as a means of control meanwhile monopolies on opium and cocaine once important revenue sources were converted or re instituted during the twentieth century to curb the abuse of controlled substances for example mallinckrodt incorporated is the only legal supplier of cocaine in the united states the regulation of gambling in many places includes a legal monopoly with respect to national or state lotteries where private operations are allowed with businesses like horse racing tracks off track betting venues and casinos the authorities may license only one operator 