Regulation of Oligopolies
Governments have also intervened in industries that were oligopolies
(rather than natural monopolies), seeking to enforce the type of price and
entry behaviour thought to be in the public interest. Such intervention
has typically taken two distinct forms. In the period following the Second
World War, many European countries, including Britain, nationalized
entire oligopolistic industries, such as railways, steel, and coal mining,
which were then run by government-appointed boards. In the United
States, airlines and railways, for example, were left in private hands, but
their decisions were regulated by government-appointed bodies that set
prices and regulated entry. As often happens, Canada followed a mixture
of British and American practices. Many Canadian Crown corporations
were established, and many firms that remained in private hands were
regulated. For example, Canadian Pacific Railway was privately owned
and regulated while Canadian National Railway, until it was privatized in
1995, was a Crown corporation.
Skepticism About Government Direction
Over the past half-century policymakers became increasingly skeptical of
their ability to improve the behaviour of oligopolistic industries by having
governments direct the details of their behaviour through either
ownership or regulation. Two main experiences were important in
developing this skepticism.