Rick Kelo - A Thought on Monopolies

Rick Kelo

What most people picture when thinking of a monopoly is a big company.  But sheer bigness alone isn't enough for a company to be a monopoly.  In order to function as a monopoly a company has to be able to withhold supply from the market in order to drive the price up.  When they can accrue a higher profit than the firm would be able to earn in the market that extra is what's known as a "monopoly profit."

In studying the history of anti-trusts Rick Kelo noticed that the majority of the monopolies in the 20th century existed in socialist countries.  Every case of actual monopoly only existed when the government granted either:

1. Special protection from domestic competition.  For example PDSVA in Venezuela has no domestic competition because the State seizes any domestic oil and gifts it to PDSVA.
2. Tariffs or import restrictions that grant protection from being under-cut by foreign competition.  Standard Oil, in America, was able to grow large because a very high tariff on kerosene protected them from foreign competition.

When we research monopolies, as Rick Kelo did, an odd pattern emerges.  We discover that very few so-called monopolies in America in the 20th century were actually monopolies.  They were accused of being monopoly based on sheer bigness alone, but even Standard Oil never withheld supply in order to raise prices.  Kerosene prices went from over 30 cents a gallon in 1869 (when Standard Oil began to grow) to a mere 8 cents a gallon by the 1880s.