We have a monopoly problem

Nobel laureate Joseph Stiglitz writes about the problems caused by monopoly capitalism.  It’s worth reading the whole piece.

Chicago economists would argue—with little backing in either theory or evidence—that one shouldn’t even worry about monopoly: In an innovative economy, monopoly power would only be temporary, and the ensuing contest to become the monopolist maximized innovation and consumer welfare.

Over the past four decades, economic theory and evidence has laid waste to such claims and the belief that some variant of the competitive equilibrium model provides a good, or even adequate, description of our economy.

But if we begin with the obvious, opposite hypothesis—that what we see in our daily life is true, that our economy is marked in industry after industry by large concentrations of market power—then we can begin to simultaneously understand much of what is going on. There has been an increase in the market power and concentration of a few firms in industry after industry, leading to an increase in prices relative to costs (in mark-ups). This lowers the standard of living every bit as much as it lowers workers’ wages.

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