rustrates" consumers, and reduces their ultimate utility from consumption. But surely the ability to charge a lower price than the prevailing market price, or no price at all, can hardly be a correct criterion for judging whether a supply is competitive or monopolistic. Indeed, since producers are also sovereign under free-market conditions, we must conclude that any supply is competitive and any price is "compatible" with consumer sovereignty and consumer satisfaction.
ROTHBARD'S MONOPOLY THEORY RECONSIDERED
Rothbard it will be recalled had defined monopoly as "a grant of special privilege from the State reserving a certain area of production to one particular individual or group." This definition of monopoly would appear to be immune from the sort of criticism employed above against both the neoclassical and Mises-Kirzner theories of monopoly. In the first place, we can be confident that competition is "lessened" by this sort of monopoly, and that resources are non-optimally allocated so far as consumers are concerned, since governmental monopoly restricts by law both competitive entry and, consequently, free consumer choice. Legal barriers to entry restrict entry by definition. Areas of production that are truly "naturally" monopolistic would hardly require governmental entry restrictions. Consequently, consumer choke must be distorted, and the subsequent resource allocations must be "inefficient," since consumers are prevented by law from making choices that differ from those already made for them by the political authority. Hence, we conclude that governmental monopoly always restricts competition, always violates consumer (and producer) sovereignty, and always "injures" consumer welfare.
It would be tempting to argue that these "restrictions" and "injuries" are, perhaps, minor in the case of "minor" legal impediments to either production or exchange. Yet, there is no satisfactory way to cardinally measure either "competition" or consumer "utility." Since utility is a completely subjective notion, and since interpersonal comparisons of utility are not possible, there is no objective way to determine how severe even "minor" state impediments to entry and competition actually are. It is completely possible, for instance, that what may appear to be an extremely inoffensive governmental regulation, i.e., setting minimum safety standards for sellers, may in fact be harmful in the extreme with respect to certain potential businessmen and specific classes of consumers.
We conclude, therefore, that any and all state restrictions are "monopolistic," competition reducing, and destructive of consumer satisfaction vis-à-vis alternative free-market situations. We also conclude, in summary, that this particular theory of monopoly is the only theory that meets all the standard critical objections and remains entirely consistent with the general Austrian methodology.
- 1. For a review of this position see, for instance, Edwin Mansfield, Microeconomics, Second Edition (Norton, 1975), Chapters 9 & 10.
- 2. Willard F. Mueller, A Primer on Monopoly and Competition (Ran¬dom House, 1970), Chapter 2.
- 3. Israel M. Kirzner, Competition and Entrepreneurship (University of Chicago Press, 1973).
- 4. D. T. Armentano, The Myths of Antitrust: Economic Theory and Legal Cases (Arlington House, 1972), Chapter 2.
- 5. Ibid., pp. 212–15, 246, 267–68.
- 6. Ludwig von Mises, Human Action (Yale University Press, 1963), p. 358.
- 7. Ibid.
- 8. Ibid., pp. 358–60
- 9. Ibid., p. 358.
- 10. Ibid., p. 371.
- 11. Ibid., p. 373
- 12. Ibid., p. 371.
- 13. Ibid., p. 373.
- 14. Ibid., p. 375.
- 15. Ibid., p. 364
- 16. Kirzner, op. cit ., Chapter 1.
- 17. Ibid., p. 21.
- 18. Ibid., p. 103.
- 19. Ibid.
- 20. Ibid., p. 105.
- 21. Ibid., p. 110.
- 22. Ibid., p. 111
- 23. Murray N. Rothbard Man, Economy, and State , Volume II (D. Van Nostrand Co., Inc., 1962), pp. 561–66. See also Journal of Economic Literature, September-October, 1974, pp. 902–3.
- 24. Rothbard, op. cit., pp. 590–93.
- 25. Ibid., p. 591.
- 26. Ibid., p. 593.
- 27. Ibid., p. 614.
- 28. Ibid., pp. 608