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In Defense of Monopoly

How Market Power Fosters Creative Production

Richard B. McKenzie and Dwight R. Lee

In Defense of Monopoly offers an unconventional but empirically grounded argument in favor of market monopolies. Authors McKenzie and Lee claim that conventional, static models exaggerate the harm done by real-world monopolies, and they show why some degree of monopoly presence is necessary to maximize the improvement of human welfare over time.

Inspired by Joseph Schumpeter's suggestion that market imperfections can drive an economy's long-term progress, In Defense of Monopoly defies conventional assumptions to show readers why an economic system's failure to efficiently allocate its resources is actually a necessary precondition for maximizing the system's long-term performance: the perfectly fluid, competitive economy idealized by most economists is decidedly inferior to one characterized by market entry and exit restrictions or costs.

An economy is not a board game in which players compete for a limited number of properties, nor is it much like the kind of blackboard games that economists use to develop their monopoly models. As McKenzie and Lee demonstrate, the creation of goods and services in the real world requires not only competition but the prospect of gains beyond a normal competitive rate of return.

Purchase Paperback from Publisher

Publisher: University of Michigan Press
Imprint: University of Michigan Press
Published: 01/2008
Pages: 320
Subject: Business & Economics - Economics/Theory, Law - Business & Financial
Print ISBN: 9780472116157
eBook ISBN: 9780472901142

DESCRIPTION

In Defense of Monopoly offers an unconventional but empirically grounded argument in favor of market monopolies. Authors McKenzie and Lee claim that conventional, static models exaggerate the harm done by real-world monopolies, and they show why some degree of monopoly presence is necessary to maximize the improvement of human welfare over time.

Inspired by Joseph Schumpeter's suggestion that market imperfections can drive an economy's long-term progress, In Defense of Monopoly defies conventional assumptions to show readers why an economic system's failure to efficiently allocate its resources is actually a necessary precondition for maximizing the system's long-term performance: the perfectly fluid, competitive economy idealized by most economists is decidedly inferior to one characterized by market entry and exit restrictions or costs.

An economy is not a board game in which players compete for a limited number of properties, nor is it much like the kind of blackboard games that economists use to develop their monopoly models. As McKenzie and Lee demonstrate, the creation of goods and services in the real world requires not only competition but the prospect of gains beyond a normal competitive rate of return.

ABOUT THE AUTHOR

Richard B. McKenzie is the Walter B. Gerken Professor of Enterprise and Society in the Paul Merage School of Business at the University of California, Irvine. Dwight R. Lee is the Bernard B. and Eugenia A. Ramsey Professor of Economics at the University of Georgia, Athens.

REVIEWS

"Antitrust law historically has been wedded to the view that monopoly is a scourge on markets. With In Defense of Monopoly, Richard McKenzie and Dwight Lee make a broad, frontal assault on conventional monopoly wisdom, arguing with force that some market pricing power is essential for the full advancement of human welfare through markets. This book is a scholarly triumph for McKenzie and Lee, and a must-read for antitrust scholars, judges, prosecutors and defense attorneys. The late economist Joseph Schumpeter would be pleased with how McKenzie and Lee extend his insights that have been largely ignored by a generation or more of economic and law scholars. While controversial, this book may transform antitrust thinking for decades." 

—E. Thomas Sullivan, Provost and Senior Vice President, and Julius E. Davis, Chair in Law, University of Minnesota