make rational economic calculation difficult (if not impossible) since no "market" would then exist for the resource. 36 Without markets economic calculation is impossible since objective prices cannot be determined. A firm that monopolized "oranges" for instance, would have no objective way of knowing, subsequently, whether it was employing its resources efficiently in the production of "orange juice," or even whether it ought to be producing orange juice at all. This "definition" of monopoly, therefore, would appear to be operationally self-destructive. The monopoly position would tend to generate inevitable irrationalities in production since entrepreneurs would have no objective way to calculate "costs."
Mises, it will be recalled, realized the inherent difficulties of defining monopoly, and so he moved on to the catallactic significance of monopoly: obtaining the monopoly price and, thus, frustrating "the wishes of the consumers." Professor Kirzner, although he denies that the elasticity of the demand function has any bearing whatever on whether a monopoly exists or not, nonetheless does argue that resource monopoly is likely to result in a restricted employment of such resources, higher prices, and larger surpluses for the producer employing the resource.37 Importantly, such ownership (at least in the short run) has "harmful effects" since it creates an incentive "for not using a scarce resource to the fullest extent compatible with the pattern of consumer's tastes in the market."38
It is really difficult to see, however, why any of this argument necessarily follows. The "pattern of consumer tastes in the market" would appear to be, simply, consumer demand. Consumer demand is the variable amount of some homogeneous stock that consumers would be willing and able to purchase at various prices. The important point to be made here is that in a free market such "demand" determinations by consumers are completely voluntary on their part, and all price-output combinations on that hypothetical function faithfully reflect that choice and relate those "wishes" to the producers. Consequently, consumers are at all times in complete control of (fully sovereign over) their own property at any given price-output combination,
It appears completely arbitrary to argue that only "low" prices, or "lower" prices induced by "supply increases," or only the "elastic" portions of a consumer's demand function are compatible with consumer sovereignty. Why are not consumers fully "sovereign" throughout the entire price-output range of their own demand function? After all it is they who determine, in certain instances, that they will trade greater volumes of dollars for fewer units of some good. Indeed, to prevent them from engaging in such exchanges would more accurately infringe upon their "sovereignty." If and when consumers become dissatisfied with such combinations, they are perfectly free to change the "elasticity" of their own demand to combinations that they do prefer.
If the above analysis is correct, it follows that resource owners or producers that voluntarily "restrict" their supplies to obtain higher prices (not "force" them up as Professor Kirzner asserts)39 have committed no socially harmful act. Restricted supplies and higher prices relative to what? All suppliers in free markets restrict their supplies in the sense that they only supply as much of a good or resource as they determine will maximize their monetary or psychic income. But, importantly, this is precisely what the "monopolist" does. If his action is "harmful," then so is the economic activity of all other suppliers in the market.
Alternatively, it cannot be argued that what distinguishes "monopoly" supply from "competitive" supply is the consequently higher prices. In the first place we have already argued that the new price-output combination is perfectly compatible with expressed consumer demand and, therefore, with consumer sovereignty. Secondly, prices are always "high" relative to lower prices that could exist, but do not. Indeed, any price at all is "high," "f