New Estimates of the Welfare Loss to Monopoly, United States: 1956-1969

Abstract

The estimates of welfare loss to monopoly reported here are substantially lower than anticipated when this research was undertaken. The cumulative bias introduced to overestimate the size of the welfare loss should, it seemed a priori, produce an estimated welfare loss of at least 5 percent. I can only conclude that there is very little ground for the common belief that a large loss of welfare exists due to the economic impact of monopoly power. It is possible that the fault lies with the measurements and not with the (viscerally sensed) reality, but as a social scientist I believe that the burden of proof now rests on those who believe the loss is large. A reallocation of economists' time toward the public sector may be indicated. Greater welfare losses to misallocation may exist as a consequence of such government activities as oil import quotas, water diversion schemes, standards enforced to safeguard common property resources such as air, water, and fish, and other programs asserted to be in the public rather than the private interest. [Авторский текст]