this post was submitted on 07 Apr 2024
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That isn't the critique of monopolies. It's well established that vertical integration and size can achieve efficiencies that are impossible at smaller scales. The critique is that once few entities have cornered a market, they can extract profit that's needed for the rest of the economy to function well. A corollary is that they don't do what people need then them to do because it isn't as profitable. If you remove profit as the variable to optimize for, the whole equation changes and you can end up with the efficiencies while serving the needs of your customers.
Monopolies in econ 101 are called inefficient because they generate excess profits. Inefficiency refers to profits that are extracted. Not inefficiency in the colloquial sense of the word.
Vertical integation and scale are not inherently monopolistic. Some monopolies formed because they exploited these advantages, but there are competative industries today where several vertically integrated companies compete.
Monopolies in econ 101 are not called inefficient because they extract profit. They're inefficient because they don't respond to market forces. Since they control all supply, they can disregard demand.
Isn't that what they said?
The profit isn't what makes the monopoly inefficient, it's what makes the market inefficient. By absorbing all the excess product it limits the available funds for other products. On top of the fact that a monopolies ability to disregard demand (and maintain high profits)