22:53
Faizan
Introduction
Economic monopoly is a major issue in economic and political discussions and I want to make a small contribution on the subject. Even though I have postgraduate studies in economics I am not a specialist, and this document is a common sense rather than an academic approach on the subject, and it is written for the general reader with no economic knowledge. English is not my first language and you will have to excuse my syntax.
The essay is mainly a critique to both the traditional Marxist approach on monopolies, and to the more modern academic approach, the so called "neoclassical theory of competition and monopoly". According to the traditional Marxist approach, capitalism leads to economic monopolies. Poor people become poorer, and capital is concentrated in fewer and fewer hands, and at the end of this process capital ends up in the hands of a small group of capitalists. The modern academic approach does not claim that. It examines whether government has to ensure that companies do not acquire excessive market power and use this power to charge consumers with "unfair" prices.
The two approaches are not irrelevant of course, but rather one is the continuation of the other. You cannot afford to ignore either of them, since they are both used to this very day. The Marxist approach is mainly used in the form of propaganda to convince the public that capitalism is bad and socialism is the solution, while the neoclassical approach examines whether government intervention is required in order to protect consumers from large companies.
My impression is that non economists tend to believe the Marxist propaganda which postulates that capitalism i.e. the free market, does indeed lead to monopoly. I think they believe so because they have been exposed to a lot of Marxist propaganda. The size of the huge corporate champions of the business world tends to enforce such beliefs. Socialists have convinced them that the large corporate size is equivalent to economic monopoly, which is actually something very wrong. Think of a small island where the government has issued only one taxi license. Is this taxi a monopoly? Of course it is, since it is the only provider of a particular service. Therefore the relationship between company size and monopoly is not as simple as it seems.
Economic monopoly is a major issue in economic and political discussions and I want to make a small contribution on the subject. Even though I have postgraduate studies in economics I am not a specialist, and this document is a common sense rather than an academic approach on the subject, and it is written for the general reader with no economic knowledge. English is not my first language and you will have to excuse my syntax.
The essay is mainly a critique to both the traditional Marxist approach on monopolies, and to the more modern academic approach, the so called "neoclassical theory of competition and monopoly". According to the traditional Marxist approach, capitalism leads to economic monopolies. Poor people become poorer, and capital is concentrated in fewer and fewer hands, and at the end of this process capital ends up in the hands of a small group of capitalists. The modern academic approach does not claim that. It examines whether government has to ensure that companies do not acquire excessive market power and use this power to charge consumers with "unfair" prices.
The two approaches are not irrelevant of course, but rather one is the continuation of the other. You cannot afford to ignore either of them, since they are both used to this very day. The Marxist approach is mainly used in the form of propaganda to convince the public that capitalism is bad and socialism is the solution, while the neoclassical approach examines whether government intervention is required in order to protect consumers from large companies.
My impression is that non economists tend to believe the Marxist propaganda which postulates that capitalism i.e. the free market, does indeed lead to monopoly. I think they believe so because they have been exposed to a lot of Marxist propaganda. The size of the huge corporate champions of the business world tends to enforce such beliefs. Socialists have convinced them that the large corporate size is equivalent to economic monopoly, which is actually something very wrong. Think of a small island where the government has issued only one taxi license. Is this taxi a monopoly? Of course it is, since it is the only provider of a particular service. Therefore the relationship between company size and monopoly is not as simple as it seems.
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