The Theory of Perfect Monopoly

There are many “firms” but they all produce the exact same thing (“homogenous products”), charge the exact same price (“homogenous prices”), and the people running these “firms” are omniscient (“perfect information”).  Sounds exactly like the U.S. Postal Service, doesn’t it?  Or the Department of Motor Vehicles. Or the pubic school monopoly. Or “Medicare for All,” God forbid.  Especially the assumption about how supposedly wise and smart the managers are.  Many locations providing the same crappy, super-expensive “service.”

Actually, these are the key assumptions of the economics profession’s theory of perfect competition, devised in the early 20th century.  It is Exhibit A of why so much of “mainstream economics” is useless, and the reason why Nobel laureate economist F.A. Hayek wrote that “in perfect competition there is no competition.”  Hayek and the Austrian School economists never accepted this nonsense.  The theory of “perfect competition” is in reality a theory of perfect monopoly.  I believe the scientific wording for such a phenomenon is “ass-backwards.”


3:58 pm on September 17, 2019