When you have an ill like gambling or liquor, it makes sense to have a state monopoly to curb usage. The high monopoly price limits usage and rakes in more money for the state. State monopolies may be better than outright prohibition. But those are the only things good about them.

This logic of externalities works less well with a price discriminating monopolists. A monopolist may charge different markups on different products based on price sensitivity. That is, they may set a different monopoly price for each kind of liquor. If they can further discriminate with affinity clubs, rebates, personal coupons and so on, then each person can be paying their own personal monopoly price. The price discriminating monopolist does not deter usage if it does a perfect job, just extracts all the consumer surplus out of the sale. That suggests that the value to the citizenry of curbing usage through a state monopoly is falling with technology.

Consider the state lottery machine in the Chicago O'Hare airport. It has about 40 different games. What may have deterred entry through a high price and low choice in yesteryear certainly looks to me like a very aggressive price discriminating monopoly. Some entries cost $10, some just $2. Some have high prizes, some low and some groups of prizes. The state is not curbing the ills of gambling in the slightest via this method. It is just expropriating all the rent for the state.

Monopolies also perpetuate high cost. There has not been much in the way of innovation in internet lotteries coming from state lotteries. Some kind of security dongle distributed in state would allow state internal internet distribution of further lotteries at much lower cost than paper. The monopolist might do a calculus that says that such a system might increase overall revenues and decrease costs, but most of that would go to the state and the players and not us. Don't expect too much innovation from monopolists that do anything except maximize their profits.

How about some conditional federal spending for states that allow liquor sales through the mail to encourage competition? That does not sound like a political winner. Good luck if you like mail order wine. The liquor lobby might well ban all mail order sales in state and out to protect each oligopoly. Cheers.

If you like monopolies, you'll love this: http://www.washingtonpost.com/wp-dyn/content/article/2005/05/02/AR2005050201445.html

"The joint venture -- to be known as the United Launch Alliance -- will end a bitter two-year legal battle between the Pentagon's largest contractors in which Lockheed accused Boeing of cheating to win rocket launch work. It also eliminates competition in a market that includes launching weather satellites for the National Oceanic and Atmospheric Administration, science satellites for NASA, spy satellites for the National Security Agency and communications satellites for the Air Force."

They've priced themselves out of the commercial market, so now let them form a launch monopoly so you can keep both pieces of junk instead of building one that's worth having.

State-controlled gambling almost always offers a worse deal for the player than their private gaming counterparts.

Here in Alberta, state-controlled slot machines are fixed at a 92% payout. That's an outrageous 'rake' for a dollar slot machine (the Vegas average for the dollar slots is more like 97-99%). The poker tables here rake 10% of the pot to a maximum of $5 (Vegas: 5%, to a maximum of $3 for the same size game). Lotteries are even worse, often raking 40% or more of the ticket price. Gambling revenue in Alberta is now higher than the the revenue from income tax.

And yet, all these rules are ostensibly put in place to 'protect the public'.

http://www.spacedaily.com/news/launchers-05zw.html
"Rather than try to compete by trimming costs or increasing efficiency, however, Boeing and Lockheed Martin instead decided to circle the wagons and team up, creating this launch monopoly from which the U.S. government - unable to use foreign rockets for political reasons - will be forced to buy, no matter how extravagant the cost."

I'll guarantee you this, once the "new" space companies start doing business with NASA, they'll end up in the same place the big companies are now. As long as there is no incentive, or actually negative incentive to excel, aerospace companies, new or old, will accommodate market pressures and fail for profit. NASA needs to provide incentives to succeed. They need to quit weighing their contractors down with unnecessary requirements and provide instead incentives for success. How much more obvious does it have to be?