Monopoly’s new era – Editor

The following extract is from an article by Prof Joseph Stiglitz which appeared in Project Syndicate on 17 May 2016:

“For 200 years, there have been two schools of thought about what determines the distribution of income — and how the economy functions. One, which emanates from Adam Smith and the nineteenth-century liberal economists, focuses on competitive markets. The other, cognisant of how Smith’s brand of liberalism leads to rapid concentration of wealth and income, takes as its starting point unfettered markets’ tendency toward monopoly. It is important to understand both, because our views about government policies and existing inequalities are shaped by which of the two schools of thought one believes provides a better description of reality…

“The implications of this are profound. Many of the assumptions about market economies are based on acceptance of the competitive model, with marginal returns commensurate with social contributions. This view has led to hesitancy about official intervention: If markets are fundamentally efficient and fair, there is little that even the best of governments could do to improve matters. But if markets are based on exploitation, the rationale for laissez-faire disappears. Indeed, in that case, the battle against entrenched power is not only a battle for democracy; it is also a battle for efficiency and shared prosperity. ”

Prof Joseph Stiglitz was chief economist at the World Bank until Jan 2000. He is currently at Columbia University business school. He was awarded the ‘Nobel’ economics prize in 2001.

Source: Project Syndicate, 17 May 2016 https://www.project-syndicate.org/commentary/high-monopoly-profits-persist-in-markets-by-joseph-e–stiglitz-2016-05