Economics Dictionary of ArgumentsHome
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| Legal monopoly: A legal monopoly in economics refers to a market structure where a single firm is granted exclusive rights by the government to produce or sell a particular good or service. This can occur through patents, copyrights, or government regulation, and aims to encourage innovation or ensure public service but can limit competition and raise prices. See also Monopolies, Cartels, Oligopolies, Monopoly price, Copyright, Patents._____________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 Legal Monopoly - Dictionary of Arguments
Rothbard III 903 Legal Monopoly/Rothbard: Selection of firms: One form of partial product prohibition is to forbid all but certain selected firms from selling a particular product. Such partial exclusion means that these firms are granted a special privilege by the government. >Sales ban/Rothbard, >Rationing/Rothbard. Monopoly grant: If such a grant is given to one person or firm, we may call it a monopoly grant; if to several persons or firms, it is a quasi-monopoly grant.(1) Both types of grant may be called monopolistic. >Monopolies, >Oligopolies. Licensing: An example of this type of grant is licensing, where all those to whom the government refuses to give or sell a license are prevented from pursuing the trade or business. Protective tariffs/import quota: Another example is a protective tariff or import quota, which prevents competition from beyond a country's geographical limits. Of course, outright monopoly grants to a firm or compulsory cartelization of an industry are clear-cut grants of monopolistic privilege. >Cartels. Monopoly price/observation/measuring/distinguishability/Rothbard: [for the free market] (…) we buried the theory of monopoly price; we must now resurrect it. The theory of monopoly price, as developed there, is illusory when applied to the free market, but it applies fully in the case of monopoly and quasi-monopoly grants. For here we have an identifiable distinction: not the spurious distinction between "competitive" and monopoly" or "monopolistic" price, but one between thefree-market price and the monopoly price. The "free-market price" is conceptually identifiable and definable, whereas the "competitive price" is not. The theory of monopoly price, therefore, properly contrasts it to the free-market price, (…). Rothbard III 904 Elasticity: The monopolist will be able to achieve a monopoly price for the product if his demand curve is inelastic above the free-market price. >Elasticity. Free market: (…) on the free market, every demand curve to a firm is elastic above the free-market price; otherwise the firm would have an incentive to raise its price and increase its revenue. Legal monopoly: But the grant of monopoly privilege renders the consumer demand curve less elastic, for the consumer is deprived of substitute products from other potential competitors. Inelasticity: Whether this Iowering of elasticity will be suffcient to make the demand curve to the firm inelastic (so that gross revenue will be greater at aprice higher than the free-market price) depends on the concrete historical data of the case and is not for economic analysis to determine. When the demand curve to the firm remains elastic (so that gross revenue will be Iower at a higher-than-free-market price), the monopolist will not reap any monopoly gain from his grant. Consumers and competitors will still be injured because their trade is prevented, but the monopolist will not gain, because his price and income will be no higher than before. On the other hand, if his demand curve is inelastic, then he institutes a monopoly price so as to maximize his revenue. His production has to be restricted in order to command the higher price. Regulatory market/regulation: The restriction of production and higher price for the product both injure the consumers. (…) We may no longer say that a restriction of production (such as in a voluntary cartel) benefits the consumers by arriving at the most value-productive point; on the contrary, the consumers are now injured because their free choice would have resulted in the free-market price. Because of coercive force applied by the State, they may not purchase goods freely from all those willing to sell. Rothbard III 906 Monopolistic grants can be either direct and evident, such as compulsory cartels or licenses; less direct, such as tariffs; or highly indirect, but nevertheless powerful. Examples: Ordinances closing businesses at specific hours, for example, or outlawing pushcart peddlers or door-to-door salesmen, are illustrations of laws that forcibly exclude competition and thereby grant monopolistic privileges. Anti-trust laws: Similarly, antitrust laws and prosecutions, while seemingly designed to "combat monopoly" and "promote competition," actually do the reverse, for they coercively penalize and repress effcient forms of market structure and activity. Even such a seemingly remote action as conscription has the effect of forcibly withdrawing young men from the labor market and thereby giving their competitors a monopolistic, or rather a restrictionist, wage.(2) >Trade Unions/Rothbard, >Minimum wage/Rothbard. 1. We might well call the latter an oligopoly grant, but this would engender hopeless confusion with existing oligopoly theory. 2. Monopolistic privileges to businesses may confer a monopoly price, depending on the elasticity of the firm's demand curve. Privileges to workers, on the other hand, always confer a higher, restrictionist price at Iower than free-market output. The reason is that a business can expand or contract its production at will; if, then, a few firms are granted the privilege of producing in a certain field, they may expand production, if conditions are ripe, and not reduce total supply. On the other hand, aside from hours worked, which is not very flexible, restriction of entry into a labor market must always reduce the total supply of labor in that industry and therefore confer a restrictionist price. Of course, a direct restriction on production such as conservation laws always reduces supply and thereby confers a restrictionist price._____________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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