Today’s Tech Giants Aren’t Really Monopolists
Competition is probably considered by everyone as an indispensable requirement for the proper economic functioning of a society. This is indeed justified because competition encourages producers of goods to look for the best ways of satisfying customers, for example by trying to offer them goods of better quality than others, or cheaper goods. But we still need to know exactly what competition is all about. There is essentially the same conception of competition in terms of public opinion and traditional economic theory. The latter proposes what is called the theory of pure and perfect competition, and it is this theory which is found in all the teachings and all the microeconomic textbooks. This theory essentially consists of contrasting competition and monopoly. A monopoly in the production of a good is considered to exist when there is a single producer of that good, as opposed to a situation of competition. This traditional theory shows that a producer, thanks to his monopoly position, can obtain a higher price from his buyers than in a competitive situation. The monopolist thus succeeds in optimizing his profit (although the existence of a high price reduces the quantity sold). But this approach to competition and monopoly must be considered wrong for reasons that we will explain below.
It may be useful to take a topical example, that of the so-called GAFA (Google, Amazon, Facebook, and Apple). It is generally believed that these companies are monopolies, according to the traditional definition, and that economic policies should therefore be implemented to challenge or eliminate this situation, since it is assumed that this necessarily has negative consequences for customers. This is why some governments want to punish them—one might say—by trying to impose high taxes on them. The European Union has already imposed fines on GAFA producers and is currently trying to put in place regulations to reduce the so-called monopoly position of the GAFA. The same is true in many countries, such as the United States.
In fact, the existence of the GAFA should be used instead to challenge the traditional theory of competition and monopoly, as we will do. First of all, it can be pointed out that the definition of a monopoly (and therefore of competition) in tradi
Article from Mises Wire