What A Monopoly Is Not
A monopoly is not the natural result of increasing returns to scale.
Economists don’t know how to prove this, and so they doubt it. And so do most people.
Let’s put this into English.
Say Huey and Dewy both own bait shops at the lake. Both run a nice business and make a reasonable economic profit. One day Huey’s Uncle Scrooge dies and leaves him a fortune. Huey decides to expand the size of his shop. He stocks every kind of tackle imaginable, charges less and hires someone to clean the bathrooms once a month.
Dewy is upset, and understandably so. After all, Uncle Scrooge left him out of the will… but now he has to try harder to compete with Huey’s shop, and eventually may go out of business.
Meanwhile Luey is sulking because there is no longer a market for the bait shop he was hoping to open, and he has to return to show business with his oddball Uncle Donald.
Is there any injustice here? Among the three there may be some jealousy, and some regrets. Huey might have made a bad investment, and his restrooms might go unattended once again. But no one has done anything wrong. No one has broken a contract, or directly damaged anyone else’s property.
But we are humans, and we like to empathize. In this case, we are most likely to empathize with the clear loser, Duey. Relatively few of us will inherit great wealth. Even fewer will find good investments for that wealth. So we relate better to the loser, and we feel sorry for him.
