I remember sitting in my Principles of Economics class my freshman semester when my professor asked, “What role should government play in the economy?” An energetic young student raised her hand and responded with, “Government must break up monopolies.” My professor loved that answer and spent the rest of the class ranting about “market failures” such as the creation of powerful monopolies. I left class that afternoon and went to the Student Center where I grabbed a sandwich that left me with a bad taste in my mouth – it was overpriced and flavorless. Just then, I had my light bulb moment. If every on-campus dining facility is owned by the same company, and there is zero competition, am I living amidst a food monopoly? An hour earlier my professor taught me that if this truly was a monopoly, I was the victim of a free market failure. But was the free market even at play here or did the university purposely crowd out market competition? Let’s explore.
On-campus food monopolies feature the same failures that are consistent with all monopolies: limited options, lack of incentives, zero competition, low efficiency, mediocre quality, and high prices. Sounds like a recipe for disaster! This cocktail of business failure attacks the market process and is exacerbated when the victims are students. With unbelievable debts, no-pay or low-paying jobs, and modest ability to travel off campus, students are the least able in society to hedge against monopoly pricing and quality. Add on the fact most schools require students to purchase gargantuan meal plans. The profit and loss systems gets totally mucked up as students choose options they would not pick if they had more choice in a free-market and thus the economic signals are thrown off. Mix up all these ingredients and you have a real sour situation for students.
Food options are so severely limited to students on-campus at most colleges and universities. Late-night paper writing or unforgettable nights with friends leave students with hunger pains in the wee hours of the morning when nothing is open. Aside from the late-night issue, many on-campus dining eateries close extremely early or open for breakfast very late. The window to eat leaves many students hungry for more manageable hours. Many schools also have horrible hurdles in order to bring food onto campus for events. Student groups must order from the food company on campus and fill out lengthy paperwork. If students want to order out, they face unbelievable obstacles and groups caught “smuggling” in food from outside establishments may even face penalties.
Unleashing the creative ability of a campus food market would work wonders overnight for the students, faculty, and administration. Prices would have to plummet and quality would have to increase or the eatery would fail. Simply, each eatery would have to begin to compete for student’s attention. Hours would drastically change, dorm delivery services would pop up, and long lines would severely shrink. Just look at the amount of off-campus businesses that compete constantly for the college kid demographic. At my school, the local Chinese restaurants slip menu’s under dorm doors every week. Thirty-cent “Wing Wednesdays”, 99-cent pizza, and student discounts at McDonalds are all great examples of local food establishments catering to college students. Imagine how hard companies would fight for consumers if they could operate on campus. This is all possible if schools broke down their protectionist policies and opened up competition in the food markets.
An entrepreneurial group of students on my campus started a food dorm delivery service last year to combat the early hours and high prices of on-campus eateries. These students deserve brownie points for their attempts to create a black market for food on campus. Many campuses prohibit underclassmen from parking cars on campus which makes it harder to go explore off-campus food. On top of this, being forced to purchase a meal plan leaves students to eat the below-average food because they must spend the money. This is the enforcement mechanism that traps students. Effectively, meal plans are crowding out competitive businesses off campus. If a meal plan is, at minimum, $1,000 per semester, students must purchase $1,000 worth of low quality food. If they don’t, they are paying out without receiving any benefit back in. These campuses are nurturing a food monopoly in which there is absolutely no fear of outside competition up to the price of the required meal plan.
I’ve criticized monopolies at length, but it’s important to remember that monopolies are not always a negative if there is one imperative condition: free entry. As long as competitors are able to freely enter the market, in this case the on-campus food market, a monopoly merely means an obvious victor in the fight for customers. If nearly all students have lunch at one establishment, but many others are open, then the monopoly comes from the benefit to the consumer, not from specific monopolistic privilege. Simply, this is protectionism at its finest. I relish the opportunity to quote the brilliant economic philosopher and satirist Frederic Bastiat and there is not a more appropriate time. Bastiat wrote his “Candle Maker’s Petition” in 1845 in which he called upon the manufactures and producers of the French lighting industry to petition the government to take action against the sun. Whether its passing protectionist legislation to ban the sun or campuses approving protectionist contracts to crush all competition, the consumer is the loser.
A common misconception about libertarians or those that support economic freedom is that they defend and protect businesses from the consumer. Contrary to this misconception, libertarians actually support the consumer over the business. Libertarians support brutal business competition which makes things easier, faster, and cheaper for the consumer. Libertarians are pro-competition and pro-consumer. Crony capitalism, special benefits to certain businesses, and corporate handouts do nothing but hamper the free market from correctly awarding, or punishing, business. Protectionism, the same as the protectionism found on college campuses, hurts the consumer, not helps. Noted Austrian theorist Ludwig von Mises points out that “almost all of the instances of monopoly prices were not created by the interplay of the factors operating on a free market.” $7 boxes of cereal, as found on Hofstra’s campus, are not the result of free-market factors. Monopoly prices do not exist in a free-market which has free entry and free exit. In all cases of powerful monopolies, government policy, regulation, taxes, fees, licenses, and purposeful restrictions are to blame.
Unfortunately for so many college students, every purchase on campus could be a lot cheaper and every meal a lot better. Campus food monopoly is an unnecessary evil and ending protectionist contracts would give the consumer, the student, so much more choice over their food. What a horrible food chain: prices can be maintained as high as the company likes, quality can remain below mediocre, lines can be long and employees can be slow. In this case, as with other cases of the perceived “market failure” argument, the free market is unable to operate and thus devoid of blame in this situation. This is a protectionism failure masquerading as a market failure. Let’s free the on-campus food contracts and allow competition to deliver low prices, high quality, and enjoyable meals to college students.