Natural Monopoly and the Question of the Factors of Production

Many economists wrongly believe that a natural monopoly would emerge through price-cutting war in a free market. The cut-throat competition is a process by which a big firm can definitely (according to the theory) drive out the other competitors through price-cutting wars. They argue that this is possible simply because big firms experience lower costs of production than smaller firms due to large-scale production. When all the remaining competitors are out of the game, no one can challenge the monopoly anymore. Apart from Rothbard’s comments, there are some additional serious problems with the theory of natural monopoly.

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Some Flaws with Akerlof’s Adverse Selection

The adverse selection is widely cited as an illustration of market failure, calling for government intervention in order to correct the market. The theory is phrased as follows : the buyers of used cars have less information than have dealers about which cars are lemons and which one are not. The asymmetric information of this kind is likely to destroy the market. Being unable to distinguish between the good and bad product, the potential buyers are reluctant to pay as much money and, because of that, the sellers will withdraw the good cars from the market. Then, the likelihood of getting a bad product increases, and the buyers will drive the price down even more.

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Rothbard’s Criticism of Monopoly Price Theory : Chapter 10 of Man, Economy, and State

Man, Economy, and State, 2nd edition, Murray N. Rothbard.

Chapter 10 — Monopoly and Competition

2. Cartels and Their Consequences

A. Cartels and “Monopoly Price”

But is not monopolizing action a restriction of production, and is not this restriction a demonstrably antisocial act? Let us first take what would seem to be the worst possible case of such action: the actual destruction of part of a product by a cartel. This is done to take advantage of an inelastic demand curve and to raise the price to gain a greater monetary income for the whole group. We can visualize, for example, the case of a coffee cartel burning great quantities of coffee.

In the first place, such actions will surely occur very seldom. Actual destruction of its product is clearly a highly wasteful act, even for the cartel; it is obvious that the factors of production which the growers had expended in producing the coffee have been spent in vain. Clearly, the production of the total quantity of coffee itself has proved to be an error, and the burning of coffee is only the aftermath and reflection of the error. Yet, be­cause of the uncertainty of the future, errors are often made. Man could labor and invest for years in the production of a good which, it may turn out, consumers hardly want at all. If, for ex­ample, consumers’ tastes had changed so that coffee would not be demanded by anyone, regardless of price, it would again have to be destroyed, with or without a cartel.

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La mobilité des revenus aux USA : l’évidence empirique

Sur le web, on lit souvent que l’Amérique est la terre des inégalités. Les pauvres restent pauvres et les riches restent riches: 1) il n’y a pas de mobilité sociale 2) le rêve américain est un mythe qui a la vie dure. Il y a du vrai et du faux : 1) il existe une certaine mobilité aux USA 2) selon ce qu’on entend, le degré de mobilité peut y être fort. Ou faible.

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Critique de la théorie du monopole naturel – alternative

Comme expliqué précédemment, monopole naturel – histoire, l’accroissement de la production s’accompagnant d’une baisse du coût unitaire, une firme expansionniste supporte plus facilement les baisses de prix que les petites entreprises, finalement acculées à la faillite. Dans ces conditions, il est peu probable que plusieurs firmes puissent coexister. Il suffit que l’une d’elles (souvent la première sur le marché) accroit sa production pour faire baisser ses coûts unitaires. L’entreprise qui relève ce challenge ne survivra pas à cette guerre des prix et se retirera vite du marché. Il est même hautement probable que les potentiels entrants, comprenant qu’il est impossible de rivaliser avec une firme dont les prix unitaires peuvent être désormais abaissés à des niveaux qui leur seraient insoutenables, décident de laisser cette entreprise faire son business. C’est là que la théorie des marchés contestables de Baumol s’effondre.

À cela, les défenseurs du marché répondent que les substituts sont possibles, qu’il n’existe pas qu’un seul moyen de produire de l’eau, de l’électricité, ou que sais-je encore. Puisque le monopole fait augmenter les prix, les autres alternatives (modes de production et de distribution) seront financièrement stimulées. Comme le rappelle DiLorenzo, la concurrence est un processus permanent de recherche et de découverte. S’il est vrai que la faille de cette théorie tient du fait que l’on ignore combien de temps cela va prendre avant que ces alternatives n’émergent, dans le cas unique où elles n’ont pas encore émergées, l’histoire ne semble pas témoigner de l’émergence d’un tel monopole naturel : The Myth of Natural Monopoly.

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