I agree with everything Paul said below.
[EMAIL PROTECTED] wrote:
> I think that it is probably safe to say that we all agree that the
> neoclassical concept of competition is bankrupt in the sence of
> implying any concept of maximization or dynamic of investment.
> What is curious is that concept seems to have almost a mystical
> power within the othordoxy despite the criticism first by
> Schumpeter and second, by John K. Galbraith. All of the
> 'competitive' sectors are stagnant and depressed. It is the
> monopoly sectors that are dynamic and agressive.
Yes, but the idea of competition has 2 very important benefits -- one
ideological and two: mathematical simplicity. Both are very attractive.
Once you have spent maybe 10 years earning a ph.d., you don't want to
discard the "human capital" you have accumulated. So I only disagree with
the term, "curious."
> In the larger context of the imbalance of economic power, I have
> argued that the monopoly/oligopoly power of the grain trade and the
> transportation system has served to transfer surplus from the
> primary purchaser to commercial/financial capital ("Staples,
> Surplus, and Exchange: The Commercial-Industrial Question in the
> National Policy Period" in *Explorations in Canadian Economic
> History: Essays in Honour of Irene Spry*, ed by Duncan Cameron,
> 1985. [I should note that Irene Spry, one of the greatest political
> economists and socialist of Canada, died within the last year.
Al Krebs's Ag Biz Tiller, which I sometimes forward to the list is excellent
in this regard. His last issue goes into great detail on the recent grain
company mergers' effect on this transfer.
>
> I have argued that intellectual property rights has been a major
> factor in the (mal)distribution of income -- I think reflecting the
> thought of Michael -- on a spatial basis. (See my "Inellectural
> Property Rights and Regional Disparity" in Intellectual Property
> Rights, ed. by KRC Nairn and Ashov Kumar, New Delhi, 1994.)
>
Yes, yes, yes.
>
> In short, I would argue that there are no proftits in the economy
> except those by monopoly which have one of four sources:
>
> a: a natural monopoly on source (e.g. oil)
> b: a legal monopoly on product/technology (i.e. copywrite/patent)
> c. a trade secret monopoly on process and/or product
> charactaristics (coke)
> d. capital entry barriers (automobiles)
Absolutely correct again, Paul. Business agrees. The kiss of death for a
company is to have its product labeled a "commodity," as was the case for
memory chips for example.
>
> But this suggests the question, what should the socialist policy
> be? If competition is a dead end, what should we be advocating?
Exactly, what we should be discussing!!!! Galbraith, like Schumpeter, tends
to favor large corporations. Others call for more competition to bring the
corps. down to size. I tried to address these questions in my new book,
Natural Instability. Here is a brief section:
As a general rule, we might follow Keynes in recognizing that a degree of
rigidity is probably helpful in preventing large shocks from destabilizing
the
economy. For example, I already mentioned that the attempt to hold wages
steady in the United States during the early years of the Great Depression
helped to maintain a degree of stability in the early months after the stock
market crash.
Other forms of rigidity help to steady the economy. For example, as Keynes
observed, since monopolistic firms face less uncertainty than a competitive
firm, industrial concentration will tend to stabilize investment (Keynes
1936,
p. 163). John Kenneth Galbraith made this same point even more forcefully:
"Price stability also serves the purposes of industrial planning. Prices
being
fixed, they are predictable over a substantial period of time. And since
one
firm's prices are another's costs so costs are also predictable. Thus on
the
one hand prices facilitate control and minimize the risk of a price collapse
that could jeopardize earnings and the autonomy of the technostructure"
(Galbraith 1967, p. 194).
Schumpeter also made a similar case for restraining laissez-faire. Recall
his
earlier-cited assertion that
##restrictions ... are ... often unavoidable incidents, of a long run
process
of expansion which they protect rather than impede. There is no more of a
paradox in this than there is in saying that motorcars are traveling faster
than they otherwise would because they are provided with brakes.
[Schumpeter
1950, p. 88]
Schumpeter added:
##inasmuch as we may assume that the refusal to lower prices strengthens
the
position of the industries which adopt that policy either by increasing
their
revenue or simply by avoiding chaos in their markets -- that is to say, so
far
as this policy is something more than a mistake on their part -- it may make
fortresses out of what otherwise might be centers of devastation.
[Schumpeter
1950, p. 95]
We should also take note that this same sort of inertia that Keynes,
Galbraith, and Schumpeter advocated can prove to be dangerous when
maintained
too long, as they themselves recognized. For example, after World War II,
many
large firms in the United States used a combination of market power and
protectionism to permit them to maintain their outdated plant and equipment,
while Europe and Japan were deploying more modern technologies. This
strategy
allowed them to enjoy a greater degree of stability, at least in the short
run,
but it eventually left these same firms vulnerable to a competitive shock
from
imports during the 1970s and 1980s.
--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]
