Final Appraisal, Monopolistic and Imperfect Competition

Monopolistic and imperfect-competition theory has done good service in exposing the weaknesses of any theory based on the assumption of pure or perfect competition.

It has explored the differences and interrelations between demand and supply schedules, and brought out the significance of such schedules as expressed in terms of margins, or rates-of-change in totals. Furthermore, light has been thrown on the con­ditions which motivate buyers and sellers, and which may enter into the determination of primary demand and supply schedules.

In this connection, it has incidentally contributed to the crit­icism of marginal productivity theories of distribution.

Perhaps, too, it may be called a service to have focused atten­tion more clearly on differentials, and on the problem of the enterpriser and his profits. It does not appear to have solved the problem, but may yet force economists to come to the defense of the enterpriser with an explanation of his functions as a competitor. This might show the basis for profits at the margin.

Some progress has been made toward a better understanding of how such differences among competitors as exist in location, quality of product, and "identifications," affect competition.

Certainly, much has been done by the theories here considered to develop the concepts of "monopoly" and "competition" in a way that must compel economists to adopt some adequate definitions of these terms. The inadequacy and confusion of defining one thing as being the absence of another should be apparent by now. It is time to define competition in positive terms as a condition of voluntary action on the part of individual producers and consumers as buyers and sellers. It is about time to begin by recognizing that a long list of conditions other than monopoly may interfere with competition — habit, custom, government, ignorance, inertia, etc.

When this time comes, some of the techniques worked out by the theorists of impure and imperfect competition will be found useful in making allowance for the market effects of the various impurities and imperfections that may affect competition. The problem of "basing points" is a case in point. Considerable progress has been made in figuring out how differences among competitors affect the working of competition, particularly in cases of duopoly and oligopoly.

But all problems of economic value concern some sort of equi­librium among elements that are different. They involve solving the problem that arises out of differences in individual valuations. Competition may be thought of as existing because of these dif­ferences, and its end is then to determine the amount of differ­ences objectively, so that they can be generally accepted and "settled." Does it not follow that a concept of monopoly as lying in singleness of kind, or uniqueness, can hardly furnish the basis for solving the problem? On the other hand, is it necessary to assume that true competitors must be equal? It seems that the theory of monopoly cannot serve as the basis for a theory of value in an economy of voluntary individual choice.

This thought brings us to the final question: If impurities and imperfections make competition so "monopolistic" or "imper­fect" that it is unreal, what then? If economics cannot rely on the competitive technique, what is to become of it? For example, it would seem to be impossible to get sufficient definite-ness and objectivity without impersonal competition. If we are to rely on bargains and agreements, either the results will be indeterminate or they will be decided on some non-economic basis, say by judicial opinion or executive order.

The tendency to emphasize the monopolistic elements and imperfections in competition has aided both those who are critial of Neo-Classical economics and those who attack volun­tary individual choice as a basis for economic values. Chamber-lin's thought points to "waste" and Robinson's to "exploita­tion."2 The general character of the analysis suggests control.