A monopoly is not an example of a market working. In fact it is precisely an example of markets not working, typically because of gov't interference. That was the case with AT&T and most utilities.
Microsoft is not a monopoly. In fact they are experiencing tremendous competition.
Self-correcting mechanisms seldom lead to chaos without some help from governments. While I haven't analyzed the Asian contagion I would guess that gov't action somewhere was the culprit to some degree.
Generally, industries which require large upfront capital expenditures are more prone to monopolies. One reason why cable and electrical utility companies were monopolies is because of the large upfront costs required to link the home to the distribution node. Once that capex is in the ground, the monopoly discourages investments as the incremental marginal cost to defend the monopoly is low, and the incumbent can drive the price well below the cost of capital to discourage competitors. Knowing this fact alone discourages new investment, which allows for the incumbent monopolist/oligopolist to extract economic rents. Eventually, technological advancement destroys monopolies, but between now and then, enormous amounts of money can be extracted from the market by a few at a price above the clearing price that would otherwise exist.
Other examples include the era of the robber barons, whereby trusts were created to discourage competition, roads and schools.
There is a reason why most roads are not private. Almost all roads in America, and the world in fact, are paid for by taxpayers. The market is not able to adequately price road-building in a private market, for the most part, because the revenues that is generated from a new road is often unknowable. What are you going to charge to get into a new subdivision before it is even built? There are too many risky and unknowable factors for an investor to make an assessment of a reasonable return for such roads. Likewise, for education, in a truly efficient market, when one is five years old, one would construct a discounted cash flow of the five year-old's earnings for the rest of their life for both a life with and without an education, and pay the difference. Clearly, that is simply unknowable, so society internalizes the costs of education and spreads it across everyone.
Finally, as one learns in the first day of Econ 101 class, in efficient markets, all facts are known and everyone is a price taker. Usually, however, both are not the case.
In real life, special interests spend enormous amounts of money to influence the legislative process to benefit themselves, which works against the efficient market. To offset this, we could ban all lobbying and influence peddling by industries. However, this seems to be anathema to the American concept of free speech. Thus, in real life, special interests influence the market at the expense of everyone else.
Markets usually work. They do not always work. Markets create the most wealth for the most people, most of the time. They do not create all the wealth for all the people, all of the time.
you must have been a McCain voter!
