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this is a real problem, but cartel is a bad solution, for very obvious reasons. (it is the main solution we currently use in Western economies, which explains why our economies have turned extractive rentier, 'cuz there's no limiting principle to cartel.) can i interest you in a better solution?

I’m interested!

(i'd love to know what you think!)

Regulate.

(How? Do you think states can fine-tune market power, allow firms just enough to cover fixed costs, but not enough to become extractive? Do you think that withstands politicians' and the public's information disadvantages when they lobby for more market power? Historically, how good are we at that?)

Government can't set optimal limits on market power. But, having identified a market failure, it can intervene in ways that improve outcomes. Safety regulation (safety testing, imposing liability, requiring disclosure of serious incidents, security 1/n

standards, prohibiting especially dangerous conduct), for example. "Historically, how good are we at that?” is the right question only if the alternative is a well-functioning market. We lack one. 2/3

But I think a thing governments are particularly bad at is tolerating market power, but only *just enough* so that the powerful market actors recoup their costs without screwing the public.

Governments can work aggressively to counter market power! Sometimes anti-trust and regulation to favor competition is very real. At the other extreme, governments can tolerate, and then become captured, by market power. cf copyright lasting to death plus 70 years, or ever expanding patent right.