Economics Dictionary of ArgumentsHome
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| Monopolies: In economics, a monopole refers to a market structure dominated by a single seller or producer, controlling the entire supply of a particular good or service. This unique market position grants the entity significant control over pricing, often leading to higher prices and limited consumer choice due to the absence of direct competitors. See also Progress, Supply, Demand, Price, Markets._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Monopolies - Dictionary of Arguments
Rothbard III Competition/monopolies//Rothbard: (…] a common worry of economic writers: What if the average cost curve of a firm continues to fall indefinitely? Would not the firm then grow so big as to constitute a "monopoly"? There is much lamentation that competition "breaks down" in such a situation. 1) Competition: Much of the emphasis on this problem comes, however, from preoccupation with the case of "pure competition," (…) is an impossible figment. 2) Secondly, it is obvious that no firm ever has been or can be infinitely large, so that limiting obstacles - rising or less rapidly falling costs - must enter somewhere, and relevantly, for every firm.(1) 3) Thirdly, if a firm, through greater effciency, does obtain a "monopoly" in some sense in its industry, it clearly does so, in the case we are considering (falling average cost), by Iowering prices and benefiting the consumers. And if (as all the theorists who attack "monopoly" agree) what is wrong with "monopoly" is precisely a restriction of production and a rise in price, there is obviously nothing wrong with a "monopoly" achieved by pursuing the directly opposite path.(2) Rothbard III 660 Monopolies/monopoly prices/VsMonopolies/VsMonopoly/Rothbard: Despite the fact that monopoly problems occupy an enormous quantity of economic writings, little or no clarity of definition exists. Erroneous definition: A common example of a confused definition is: "Monopoly exists when a firm has control over its price." RothbardVs: This definition is a mixture of confusion and absurdity. In the first place, on the free market there is no such thing as "control" over the price in an exchange; in any exchange the price of the sale is voluntarily agreed upon by both parties. No "control" is exercised by either party; the only control is each person's control over his own actions -stemming from his self-sovereignty - and consequently his control will be over his own decision to enter or not to enter into an exchange at any hypothetical price. There is no direct control over price because price is a mutual phenomenon. On the other hand, each person has absolute control over his own action and therefore over the price which he will attempt to charge for any particular good. Rothbard III 662 Monopoly price: (…) it is completely false to say that the [small] farmer and [Henry] Ford differ in their control over price. Both have exactly the same degree of control and of noncontrol: i.e., both have absolute control over the quantity they produce and the price which they attempt to get(3) and absolute noncontrol over the price-and-quantity transaction that finally takes place. The farmer is free to ask any price he wants, just as Ford is, and is free to lookfor a buyer at such a price. He is not in the least compelled to sell his produce to the organized "markets" if he can do better elsewhere. Every producer of every product is free, in a free-market society, to produce as much as he wants of whatever he possesses or can purchase and to try to sell it, at whatever price he can get, to anyone he can find.(4) Market price/Rothbard: Who officially “sets” the price in any exchange is a completely trivial and irrelevant technological question—a matter of institutional convenience rather than economic analysis. Rothbard III 664 Brand name/brand awareness/competition/Rothbard: One common objection is that Ford is able to acquire "monopoly power" or "monopolistic power" because his product has a recognized brand name or trademark, which the wheat farmer has not. RothbardVs: This, however, is surely a case of putting the cart before the horse. The brand name and the wide knowledge of the brand come from consumers' desire for the product attached to that particular brand and are therefore a result of consumer demand rather than a pre-existing means for some sort of "monopolistic power" over the consumers. Rothbard III 671 Definition of monopoly/Rothbard: Before adopting this definition of monopoly as the proper one, we must consider a final alternative: the defining of a monopolist as a person who has achieved a monopoly price (definition 3; (definition 1: „there is only one seller of a good“)). This definition 3 has never been explicitly set forth, but it has been implicit in the most worthwhile of the neoclassical writings on this subject. >Monopoly price/Rothbard, >Monopoly price/Economic theories. Rothbard III 692 Scarcity of production factors/Rothbard: (…) the attempt to establish the existence of idle resources as a criterion of monopolistic "withholding" of factors [is not] valid. Idle labor resources will always mean increased leisure, and therefore the leisure motive will always be intertwined with any alleged "monopolistic" motive. It therefore becomes impossible to separate them. The existence of idle land may always be due to the fact of the relative scarcity of labor as compared with available land. This relative scarcity makes it more serviceable to consumers, and hence more remunerative, to invest labor in certain areas ofland, and not in others. 1. On the “orthodox” neglect of cost limitations, see Robbins, “Remarks upon Certain Aspects of the Theory of Costs.” 2. Cf. Mises, Human Action, New Haven, Conn.: Yale University Press, 1949. Reprinted by the Ludwig von Mises Institute, 1998. p. 367. 3. We are, of course, not considering here particular uncertainties of agriculture resulting from climate, etc. 4. For further discussion, see Murray N. Rothbard, “The Bogey of Administered Prices,” The Freeman, September, 1959, pp. 39–41._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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> Counter arguments against Rothbard
> Counter arguments in relation to Monopolies
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