Why There Is No Such Thing As An Exploitative Monopoly In A Free Market

What's a telltale sign of economic illiteracy?

I'm starting to believe the worst is the claim that markets lead to monopoly and the accumulation of wealth in a few hands. Why? Because it makes no sense at all on the face of it and has no logical explanation, so it is indicative
of fundamental confusion and misunderstanding.

Granted, many great thinkers have been deluded by this, including Joseph Schumpeter (the old pessimist, not the young optimist). It is nevertheless a fundamental error. This error lies not in the fact that some, or even many, businessmen strive for empire, that businesses and businessmen would like and may wish for monopoly, or that they seek as much profit as possible, but in mistaking the aims of individual actors for the mechanism that they collectively comprise. This is like figuring the function of money in the economy by studying a dollar bill.

Little, if anything, will come of it, because the instance is not the function.

This difference is captured in the slogans "promarket, not pro-business" or "free market anticapitalism," which here have similar meanings. The core of the market is voluntary exchange undertaken for private gain. But in voluntary (nonfraudulent) exchange both parties, not only one, anticipate gain. There is no transfer of wealth, but an increase on both sides.

The market comprises any and all voluntary exchanges, and sees no barriers to entry other than scarcity: you cannot trade what you do not have.

Markets ease the burden of scarcity on society by determining relative values (prices) and through them allocate resources to the most productive hands (from the perspective of consumers; i.e., value creation). In this situation, one can only accumulate wealth through production followed by an exchange that is anticipated to benefit consumers, who are the final arbiters of value. Even if one were to monopolize some valued resource, it only has value when utilized in
production. If I were to monopolize meat, I could only use this situation for my benefit by selling the meat.

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Per Bylund is assistant professor of entrepreneurship & Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University. Website:  more

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