Author
Abstract
Our forebears --- including Adam Smith, Anne Robert Jacques Turgot, William Stanley Jevons, Frank A. Fetter, Lionel Robbins, Jacob Viner, Henry Simons and Thurman Arnold --- understood there were many types of groups or organizations that develop into monopolies, including trade associations, cartels, unions, cooperatives and professional associations. They also emphasized that it's difficult to know the full extent of monopolization, as many monopolies were informally organized, while others, perhaps the majority, were alliances of monopolies, making both types hard to detect. Our forebears also understood that monopolies took many types of harmful actions, such as destroying substitutes for their products and services, typically those purchased by low income families. They saw monopolies as the major cause of inequality. But after 1950, our profession simply ignored our forebears' great knowledge. At this time, we adopted the definition of monopoly we have used for the last 75 years --- "A monopoly is a firm that is a single seller with no close substitutes." This obviously presents a very narrow view of the organizations that develop into monopolies and the type of harmful actions they take. Under such a view, Harberger (1954) found that the social costs of monopoly were trivial. Our profession's interest in monopoly subsequently waned (see, e.g., Krugman (2015)). But our views about monopoly should not be driven by Harberger (1954), rather we should look to our great forebears. Moreover, a recent literature conducting research in the "spirit" of our forebears (reviewed in Schmitz (2020)) has essentially rediscovered our forebears' findings but for our current period. Our profession should be studying monopoly much more extensively.