Soak the Famous

Adam Smith didn't mince words about monopolies.  They are "absurd and oppressive[.] ... Like the laws of Draco, these laws may be said to be written in blood."  The monopolies he had in mind were those granted by the government: the king or one of his cronies had the exclusive right to manufacture or sell a particular product. It was Thomas Malthus who first noticed that there could be "natural" monopolies.  The example he gave was the wine from certain vineyards in France.  But most natural monopolies are hypothetical: if all the diamonds in the world were located in a small region of South Africa, the owners of the land could monopolize the resource. Economists naturally were not very interested in imaginary "resource" monopolies and instead began focusing on non-government monopolies that were the result of production costs: economies of scale, high entry costs, etc.  By the early 1930s, economists were seeing quasi-monopolies everywhere.  They were...(Read Full Article)

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