Austrian View on Capitalistic Monopoly

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    A host on RT’s Prime Interest was interviewing another host on RT, Thom Hartmann, Host of The Big Picture. He was saying that the “lack of government laws encourage Monopoly” and “Free Markets always lead to Monopoly.” which I suspect he thought as not a good thing. What is the Austrian view on Monopoly by businesses? Good, bad, etc?


    See lecture 11 in Herbener’s Austrian Economics, Step by Step course. Rothbard also has a chapter dedicated to this subject in Man, Economy, and State (Ch. 10).

    Quick summary: Rothbard finds the only sensible definition of monopoly as a state-imposed exclusion of competing firms in favor of one particular firm. A definition “single seller of a particular product” leads to absurdities, such as “we are all monopolists of our own labor.” Also, remember, goods are defined by individuals, and so any slight difference as judged by individuals (as maybe even the location of a firm) means those different firms are selling different products and are thus monopolists.

    Rothbard goes on to find many different problems with the comparison of monopoly prices to so-called “perfectly competitive” prices but does show in the end that many criticisms of free-market monopolies do correctly apply to state-imposed monopolies.


    Definitely that Rothbard chapter is the key. I wrote a popular article on the subject:

    It doesn’t really get into theory, but it has its place.

    I think the Austrian Economics forum is a better place for this question, by the way; you’re more likely to get answers there.


    An interesting monetarist take on this general question is Robert Bork’s THE ANTITRUST PARADOX. In general, it shows that rapacious monopoly in a free market is a myth–and that antitrust law is counter-productive.


    If you prefer a video watch this one from Praxgirl, a part of her series on praxeology:



    With Obamacare and the rest of the torrential regulations, I worry about the state of competition within the US. One trip to China will show that it is competition (not democracy) which brings prosperity.

    If they are so uneconomic, why did various monopolies/cartels/etc grow so spectacularly ~1840+ that they were banned? One might argue government protection, but that did not apply to domestic steel.

    The analyses I read assume linear, proportional production and ignore start-up/fixed costs and network effects (Metcalfe). The constantly rising unit cost curves shown by Economics professors apply to very few (any?) goods — average cost falls with increased production until capacity is reached. Even then a 10% shift differential will only add 4% to _marginal_ costs.

    (For Tom: depending on how you define it, predatory pricing is actually common — how else do you think companies get in the red? Groceries are a very narrow margin business. MegaMart’s profits would increase rapidly — 300 k$ per store is _easy_. Rather than the (currently illegal) minimum price agreement, Merck would more likely just want a cut of WalMart’s increased margins. Easily negotiated. The DeBeers analysis neglects the other[Canadian] producers.)

    Is the Austrian view no-pro-competition law save correcting past protection? (Today’s Internet likely would not exist without the 1982 AT&T breakup.) To the extent that cartel agreements should be enforced in court? What about patents, copyright and bankruptcy — aren’t these also government interferences in the market?

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