Editor’s Introduction: The Social Problem of Monopoly

• DOI: http://doi.org/10.1111/ajes.12305
• Published date: 01 November 2019
• Author: Clifford W. Cobb
• Date: 01 November 2019

Editor’s Introduction:

The Social Problem of Monopoly

By Clifford W. Cobb

The term “monopoly” has been used in various ways, but in this col-

lection of essays, it refers to concentrations of power that stem from

privilege, office, or great wealth. In the most general sense, monopoly

might be defined as a positional advantage that allows someone to

exercise control over some aspect of the lives of other people. From

the ancient world until today, monopoly has been synonymous with

tyranny.

In ancient Greece, the term “monopṓlion” referred to “a right of

exclusive sale,” which amounted to a government-issued license to

control the market for a particular product. In some societies, the

government operated exclusive franchises (particularly mines and for-

ests for shipbuilding) on its own. In other cases, the rights were held

privately. Since there was no clear distinction between economy and

polity, a license to produce a strategic resource or service could be

considered a transfer of sovereignty. The “private” owner of a mine,

forest, fishery, or port assumed the privilege of governing the rele-

vant territory as an extension of the state. The British and Dutch East

Indies Companies were granted privileges as monopolists in the field

of trade in the 18th century and ruled over colonial territory as sov-

ereign powers. In our own time, a similar role is played by defense

contractors, which are nominally private, but that are treated as exten-

sions of government power with cost-plus contracts, assured markets,

and the right of access to state secrets.

In the 20th century, the meaning of the term “monopoly” became se-

verely restricted at the hands of economists. Their aim was to demon-

strate a priori and thus without empirical evidence that monopolies

pose no hazard to society. This was a clever ruse and was largely

American Journal of Economics and Sociology, Vol. 78, No. 5 (November, 2019).

DOI: 10.1111/ajes.12305

© 2019 American Journal of Economics and Sociology, Inc.

1044 The American Journal of Economics and Sociology

successful, since the economics profession has largely capitulated by

ignoring the problem of monopoly since the 1970s.

Joseph Stiglitz (2017) is one of the rare economists who strives to

keep the broad meaning of monopoly in use. He suggests that con-

centrated ownership of many industrial sectors by a small business

elite is the problem at the heart of various other social problems fac-

ing the United States.

Some century and a quarter ago, America was, in some ways, at a similar

juncture: Political and economic power seemed concentrated in a few

hands, in ways that were inconsonant with our democratic ideals. … We

passed [antitrust laws]. … Importantly, these laws were based on the belief

that concentrations of economic power inevitably would lead to concen-

trations in political power. Antitrust policy was not based on a finely honed

economic analysis, resting on concurrent advances in economics. It was

really about the nature of our society and democracy. … We have become

a rent-seeking society, dominated by market power of large corporations,

unchecked by countervailing powers. And the power of workers has been

weakened, if not eviscerated. … Much is at stake—not just the efficiency of

our market economy, but the very nature of our democratic society.

Nevertheless, Stiglitz is not representative here of the economics pro-

fession. He is functioning more as a public intellectual, reminding us

of the peril of leaving important topics in the hands of professional

economists, who generally seem indifferent to the dangers of tyranny.

To understand the coup d’etat that took place in 20th-century eco-

nomics and transformed it into an amoral discipline that looked the

other way as elites gained increasing control of the economy and

political system, we must go back to the period before it took place.

In the 18th century, a broad meaning of the term “monopoly”

prevailed in political economy. It simply meant restrictions on com-

merce, most of which occurred as a result of government action. It

was one of the most important problems discussed in the founding of

the government of the United States. Thomas Jefferson ([1787] 1977),

for example, proposed that the Bill of Rights include a provision re-

stricting monopolies, along with “protection against standing armies.”

Alexander Hamilton ([1791] 1966) defended the use of tariffs to pro-

vide protection to domestic industries, despite arguments that there is