Are we being ripped off ?
How can we tell the difference between things that are expensive because they are naturally scarce, and things that are expensive because of artificial means - legislation,regulation or foul play ?
A company with stiff competition will be less profitable than a company with incompetent rivals.
Nobody is ripping anybody off; instead, Axel and Bob are being rewarded because they are offering something both scarce and highly valued.
Whatever the reason, the effect is the same: established companies, free of competition, enjoy high profits.
If I want to know whether I am being ripped off by supermarkets, banks or drug companies, I can find out how profitable those industries are.
If they are making high profits, then initially I am suspicious. But if it seems that it is fairly easy to set up a new company and compete, I become less suspicious.
It means that the high profits are caused by a natural scarcity: there are not many really good banking organisations in the world, and good banking organisations are much more efficient than bad ones.
