The development of the theories of perfect competition and monopoly in the history of economic thought: 1700-1926.
thesisposted on 19.11.2015, 09:11 by Roger. Clarke
This thesis is concerned to trace the development of the theories of perfect competition and monopoly in the history of economic thought, from 1700 to 1926. It is shown that in the process of this development the concepts of competition and monopoly were to undergo a number of transformations as they developed from essentially crude beginnings in the pre-Smithian era to a much more fully worked cut form at the end of our period. In particular we stress the distinction between the Classical view of competition and monopoly and that of the French mathematical economist, Augustin Cournot. The Classical economists, following Adam Smith (1776), were concerned to analyze free competition, the mechanism by which economic resources move between trades in order to equalize profit differentials. In their analysis monopoly was treated as the opposite of free competition and used to denote cases where barriers to such movement exist. In contrast, Cournot (1838) analyzed the notion of unlimited or pure competition, a market structure under which producers are so numerous that each acts as price-taker. In his analysis, monopoly is defined as the case of a single producer, and pure competition and monopoly represent polar cases classification of market structures based on the number of producers in the market. The modern theories of perfect competition and monopoly are seen evolving from a synthesis of these two strands of thought, preeminently in the work of Marshall (189O). In this synthesis, Cournot's analysis was integrated with the earlier Classical ideas as far as competition was concerned, whilst the Classical analysis of monopoly was abandoned in favour of Cournot's treatment. This compromise gave rise to a number of conceptual problem's which were to be instrumental in calling into question the traditional belief that competitive analysis was generally applicable to capitalist economies.