Monopolistic Practices

5. What is a monopoly?

(a) Monopolist means Single Seller.*

Literally therefore anyone is a monopolist who sells anything that is not in every respect, wrapping and location and service included, exactly like what other people sell: every grocer, or every haberdasher, or every seller of “Good Humors” on a road that is not simply lined with sellers of the same brand of ice cream. This however is not what we mean when talking about monopolists.

We mean only those single sellers whose markets are not open to the intrusion of would-be producers of the same commodity and of actual producers of similar ones or, speaking slightly more technically, only those single sellers who face a given demand schedule that is severely independent of their own action as well as of any reactions to their action by other concerns. The traditional Cournot-Marshall theory of monopoly as extended and amended by later authors holds only if we define it in this way and there is, so it seems, no point in calling anything a monopoly to which that theory does not apply.

But if accordingly we do define it like this, then it becomes evident immediately that pure cases of long-run monopoly must be of the rarest occurrence and that even tolerable approximations to the requirements of the concept must be still rarer than are cases of perfect competition. The power to exploit at pleasure a given pattern of demand—or one that changes independently of the monopolist’s action and of the reactions it provokes—can under the conditions of intact capitalism hardly persist for a period long enough to matter for the analysis of total output, unless buttressed by public authority, for instance, in the case of fiscal monopolies. A modern business concern not so protected—i.e., even if protected by import duties or import prohibitions—and yet wielding that power (except temporarily) is not easy to find or even to imagine. Even railroads and power and light concerns had first to create the demand for their services and, when they had done so, to defend their market against competition. Outside the field of public utilities, the position of a single seller can in general be conquered—and retained for decades—only on the condition that he does not behave like a monopolist. Short-run monopoly will be touched upon presently.

Why then all this talk about monopoly? The answer is not without interest for the student of the psychology of political discussion. Of course, the concept of monopoly is being loosely used just like any other.

People speak of a country’s having a monopoly of something or other 16 even if the

16 These so-called monopolies have of late come to the fore in connection with the proposal to withhold certain materials from aggressor nations. The lessons of this discussion have some bearing upon our problem by way of analogy. At first, much was thought of the possibilities of that weapon. Then, on looking more closely at it, people found their lists of such materials to be shrinking, because it became increasingly clear that there are very few things that cannot he either produced or substituted for in the areas in question. And finally a suspicion began to industry in question is highly competitive and so on. But this is not all. Economists, government agents, journalists and politicians in this country obviously love the word because it has come to be a term of opprobrium which is sure to rouse the public’s hostility against any interest so labeled. In the Anglo-American world monopoly has been cursed and associated with functionless exploitation ever since, in the sixteenth and seventeenth centuries, it was English administrative practice to create monopoly positions in large numbers which, on the one hand, answered fairly well to the theoretical pattern of monopolist behavior and, on the other hand, fully justified the wave of indignation that impressed even the great Elizabeth. Nothing is so retentive as a nation’s memory. Our time offers other and more important instances of a nation’s reaction to what happened centuries ago. That practice made the English-speaking public so monopoly-conscious that it acquired a habit of attributing to that sinister power practically everything it disliked about business. To the typical liberal bourgeois in particular, monopoly became the father of almost all abuses—in fact, it became his pet bogey. Adam Smith, 17 thinking primarily of monopolies of the Tudor and Stuart type, frowned on them in awful dignity. Sir Robert Peel—who like most conservatives occasionally knew how to borrow from the arsenal of the demagogue—in his famous epilogue to his last period of office that gave so much offense to his associates, spoke of a monopoly of bread or wheat, though English grain production was of course perfectly competitive in spite of protection. 18 And in this country monopoly is being made practically synonymous with any large-scale business.