gh Rothbard admits that the first definition (single seller) is a coherent and even a "legitimate" one, he rejects it as impractical because it is too broad and all-inclusive. The impractical nature of this definition can be illustrated, Rothbard argues, by noting that any difference (differentiation) in any two goods or resources and, more importantly, any consumer-perceived difference in any two commodities or resources will make them unique (specific) goods and thus, by definition, "monopoly." Hence, "the single seller of any given good" could always reduce to the notion that everyone is a monopolist since each person in a market system is presumed to have exclusive ownership of his own (unique) property. But a definition that makes everything monopoly and everyone a monopolist is barren, "confusing," and "absurd" according to Rothbard.25
Rothbard clearly prefers the second definition of monopoly—i.e., a grant of privilege from the state restricting competitive production or sale. This is a monopoly since entry into the privileged activity is prohibited by the state; logically, no such monopoly could ever exist in a free market. This definition will be adopted as the "proper" one should the final alternative definition prove nonsensical or illegitimate.26
Rothbard's criticism of the theory of "monopoly price" (as well as his criticism of the theory of "competitive price") is certainly a controversial contribution to the literature on monopoly. For here he argues that in a free market there is simply no way of conceptually distinguishing "monopoly price" from a free-market competitive price.
On the free market there is no way of distinguishing a "monopoly price" or a "subcompetitive price" or of establishing any changes as movements from one to the other. No criteria can be found for making such distinctions. The concept of monopoly price as distinguished from competitive price is therefore untenable. We can speak only of the free market price.27
It has been common, of course, to speak of monopoly price as that price accomplished when output is restricted under conditions of inelastic demand, thus increasing the net income of the supplier. Even Mises, it will be recalled, employed the term in this manner and drew some fairly dismal welfare implications from the "restriction."
Rothbard argues, however, that there is no objective way to determine that such a price is a monopoly price or that such a "restriction" is antisocial. All we can know, according to Rothbard, is that all firms attempt to produce a stock of goods that maximizes their net income given their estimation of demand. They attempt to price (other things being equal) such that the range of demand above the asking price is elastic. If they discover that they can increase their monetary income by producing less—or even destroying existing stock—in the next selling period, then they do so.
Rothbard maintains that to speak of the initial price as the "competitive" price, and the second-period price as the "monopoly" price makes no objective sense. How, he asks, is it to be objectively determined that the first price is really the "competitive" price? Could it, in fact have been a "subcompetitive" price? Indeed, the entire discussion is absurd for Rothbard since there are no independent criteria that would allow either determination. All that can be known for sure, he argues, is that the prices both before and after the supply change are free-market prices.
Rothbard also argues that "monopoly" prices cannot be inferred by comparing such prices to prices charged for similar factors. So long as the factors are not perfectly identical in the eyes of buyers, the differences in price (or profits) are simply free-market determinations of value for different goods. And any talk of monopoly price or monopoly "gain" when two different factors or goods are being compared is analytically incorrect.28
Finally, the welfare implications concerning alleged monopoly prices would not follow even if such prices could exist. Since the inelasticity of demand for Rothbard is "purel