Calculation and Monopoly

Mon Oct 31 09:30:13 MST 1994

	It was asked in a recent post:  "What about their being embedded in a
market makes inapplicable the planning that goes on WITHIN huge corporations
who have huge monopolies over that market?"
	This is a very relevant question, and it was addressed by the Austrian
economist Murray Rothbard, who extended the Misesian-Hayekian critique even
into the area of monopoly theory.  Austrians, of course, do not believe that
monopolies can emerge on purely market grounds; theoretically and historically,
the only monopolies to emerge are those which gain a political privilege or
barrier to entry.  It is no coincidence that businessmen have been the
handmaidens of regulation, since it is regulation which destroys the rivalrous
competition of the market in favor of corporativist price fixing and
cartelization.  Nevertheless, Rothbard argued effectively that those cartels
that attempt large-scale market integration are inevitably victimized by the
same "internal contradictions" as their socialist counterparts.  Their very
ability to plan depends upon the profit-and-loss signals of the market that
they have gone far to eliminate.  Without continued political intervention,
either the cartel disappears in a merger or from various forms of cheating that
arise among independent entities within the cartel's structure.  Rothbard
argues that if socialism proves to be the most efficient method of production,
it would have to emerge through the market itself, like One Big Cartel.
Rothbard asks:

	"If . . . central planning is really more efficient, why has it not
been established by profit-seeking individuals on the free market?  The fact
that One Big Cartel has never been formed voluntarily and that it needs the
coercive might of the State to be formed demonstrates that it could not
possibly be the most efficient method of satisfying consumer desires."

	In essence, the Austrians argue that One Big Cartel and monopolistic
control has the SAME calculational problems that are inherent in non-market
socialist systems.  Rothbard again:

	". . . paradoxically, the reason why a socialist economy cannot
calculate is not specifically because it is socialist! . . . The reason for the
impossibility of calculation under socialism is that one agent owns or directs
the use of all resources in the economy.  It should be clear that it does not
make any difference whether that one agent is the State or one private
individual or private cartel.  Whichever occurs, there is no possibility of
calculation anywhere in the production structure, since production processes
would be only internal and without markets."

	This reasoning, coupled with the Austro-Hayekian insights into the
nature of the knowledge problem (discussed in previous posts), is but one more
argument against centralization - whether "capitalistic" or "socialistic" -
since all such forms are insulated from the dynamic rigors of competitive
markets that provide the context within which a structure of relative prices is
both generated and meaningful to the various participants.

					- Chris
Dr. Chris M. Sciabarra
Visiting Scholar, N.Y.U. Department of Politics
INTERNET:  sciabrrc at
  BITNET:  sciabrrc at nyuacf


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