Chamberlin - A Tentative Evaluation

Chamberlin: A Tentative Evaluation

Chamberlin's Theory of Monopolistic Competition was an important benchmark in the development of value and the theory of industrial organization. A great deal of interest developed in models of monopolistic competition in the 1930s, 1940s, and 1950s. Professors Fritz Machlup, Robert Triffen, William Fellner, Arthur Smithies, and many others have built upon Chamberlin's work. Practically every text in principles of economics and in intermediate microeconomic analysis devotes space to Chamberlin and his ideas.
Chamberlin himself devoted his entire life to the selling of his theory. In article after article he amplified, corrected, expanded, and contrasted issues surrounding monopolistic competition, and many of these appeared as appendixes to successive editions of The Theory of Monopolistic Competition (it went through seven editions).

Although a number of theorists continue to work Chamberlinian "realism" into value theory, a large and ever-growing coterie has come to defend an expanded model of perfect competition as a more consistent and useful approach to microeconomic problems. Why? Not because the assumptions of perfect competition seem more realistic, but because a modified competitive analysis seems to yield very fruitful predictions concerning the behavior of price and quantity in individual markets. The outcome is uncertain, but it is clear that at the time, Chamberlin struck a responsive chord in economic analysis in emphasizing monopolistic elements in the competitive process. Interest in the market conditions of specific industries, which gave impetus to industry studies and to the field of industrial organization, owes much to E. H. Chamberlin's work. In addition, many of his ideas have raised questions that are still relevant to economic analysis. Chamberlin's major achievement, then, seems to have suggested and partially implemented interesting new paths of analysis rather than to have provided economics with a well-cultivated and finished alternative to the competitive model. Thus Chamberlin's contributions were noteworthy, substantial, and important for the future of economic theory. (On the filiation of ideas between Chamberlin and Austrian/Chicago approaches, see the box, The Force of Ideas: Imperfect Competition Meets Industrial Organization.)