that theoretical approach? In the sections below we will turn to a critical examination of Austrian monopoly theory in an attempt to answer these questions. The views of von Mises, Kirzner, and Rothbard will be taken as representative of various Austrian positions concerning monopoly.
MISES'S MONOPOLY THEORY
Monopoly exists for Ludwig von Mises when "…the whole supply of the commodity is controlled by a single seller or a group of sellers acting in concert."6 This condition puts the monopolist (or cartel) in the position of being able to restrict supply in order to raise market price without having to "fear that his plans will be frustrated by interference on the part of the other sellers of the same commodity."7 Mises holds, however, that monopoly prices do not result unless the restriction in supply produces prices that actually increase the monopolist's "total net proceeds." Only if the demand for the product is inelastic in the price range under discussion could "monopoly prices emerge as differentiated from competitive prices." Hence, it is not "monopoly" as such that is catallactically relevant for Mises, but only the "configuration" of the demand function and the emergence of monopoly prices.8
Importantly if such monopoly prices do exist, then they are an "infringement of the supremacy of the consumers and the democracy of the market."9 Mises even goes further:
Monopoly prices are consequential only because they are the outcome of a conduct of business defying the supremacy of the consumers and substituting the private interests of the monopolist for those of the public. They are the only instance in the operation of a market economy in which the distinction between production for profit and production for use could to some extent be made…10
The characteristic feature of monopoly prices is the monopolist's defiance of the wishes of the consumers.11
Mises also argues that although most monopolies and monopoly prices are made possible by government intervention in the free market (tariffs, licenses, etc.), there are certain instances in which monopoly (and monopoly prices) arise in the unhampered market. He specifically mentions natural resource monopoly,12 geographic monopoly,13 limited-space monopoly,14 and monopoly that might arise because consumers place a "special confidence…on the individual or firm concerned on account of previous experience,"15 as with certain trademarked drugs.
KJRZNER'S MONOPOLY THEORY
Professor Kirzner's theory of monopoly can be derived logically from his well-articulated theory of the competitive process.16 Kirzner views the market process as one in which market sellers are continually attempting to inch ahead of rivals by offering more attractive opportunities to potential buyers. And he views this process as inherently competitive since the key ingredient that makes the process function—entrepreneurship—can never be monopolized. For Kirzner, pure entrepreneurship requires no resources whatsoever; hence the freedom to enter the market is absolute since no obstacles to entry can ever exist in a free market.
However, the exercise of entrepreneurship is quite another matter. Here the exclusive ownership or control of "all the current endowment of a certain resource" is defined by Kirzner to be monopoly, can indeed block entry into the production of some specific good, and can hamper competition and "impede the course of the market process." A monopoly producer for Kirzner is one whose "exclusive input blocks competitive entry into the production of his products."17 To employ Kirzner's example, without access to oranges, "production of orange juice is blocked."18
Kirzner notes that monopoly should not refer to a producer who—in the absence of resource monopoly—is the single supplier of some product in the market. That firm, he reasons, is still fully subject to the market process since entry into competitive production is always possible. On the other hand, when "needed resources" are restricted because of monopoly ownership or control of a certain resource, the very possibility of competi