Economics Questions

Re: Austrian Monopsony Theory

Wheylous — Wed, 19 Dec 2012 20:41:01 GMT

Here is Cliffor Winston (not Austrian) on monopsony:

Firms can also be indicted under the antitrust laws for anticompetitive behavior that enables

them to become the sole buyer of a product. In practice, such monopsony power has primarily been a

concern of public policy because a sole employer in a market tends to pay employees below the value

of their marginal product. But instead of prosecuting ﬁrms that set monopsony wages, the government,

as codiﬁed in the National Labor Relations Act, has guaranteed the right of employees to organize and

engage in collective (union) bargaining with their employers to determine wages and other terms of

employment. Collective bargaining has raised wages, but it cannot be justiﬁed as a counter to monopsony power in the labor market because such power is rare and not much of a factor in low wage rates

(Boal and Ransom 1997)

http://www.brookings.edu/views/papers/winston/20061003.pdf

Re: Austrian Monopsony Theory

Raoul — Wed, 19 Dec 2012 19:30:23 GMT

That troubles me as well, but Rothbard's critique is only directed against the concept of monopoly price under free competition. At the opposite, Rothbard thinks the monopoly price concept is meaningfull where there's violent intervention in the market (see MES, p903 and f.) According to Rothbard, there's a conceptual difference betwen free market price and interventionist price. Méra explores the later hypothesis.

Re: Austrian Monopsony Theory

Physiocrat — Wed, 19 Dec 2012 19:18:39 GMT

That's about the correct summation Raoul. One thing that troubles me is that how can it be said that a monopolist reduces output? To what level are we comparing it to. Rothbard's monopoly theory states only that the price will increase or the quality decrease, not that it will produce less.

Re: Austrian Monopsony Theory

Raoul — Wed, 19 Dec 2012 19:08:12 GMT

As far as I remember, the paper doesn't really deal with "monopsony" as such. It's more about the purchasing behavior of legal monopolies regarding the factors they use. Because they are monopolies, by hypothesis, they are the only purchasers of their specific factors. Now, because legal monopolies can easily restrict their production in order to obtain higher prices, they need less factors. What are the effects on the prices of these factors, etc ?

Re: Austrian Monopsony Theory

Physiocrat — Wed, 19 Dec 2012 19:04:10 GMT

I suppose it depends to some extent what we mean by monopsony. Maybe it would be more helpful to call Mera's concept Oligopsony instead.

As an aside though, Rothbard called anything which depended massively on government intervention a monopoly not a body who could monopolise the entire supply of a good.

Re: Austrian Monopsony Theory

Neodoxy — Wed, 19 Dec 2012 18:40:10 GMT

Rothbard writes off monopsony in Man, Economy, and State. He argues that there can never truly be a monopoly on labor because its the most non-specific factor of production and that therefore no industry could ever have a monopoly over employment. Like most everything Rothbard wrote in his chapter on competition I believe that this claim is a combination of truth and falsehood.

Re: Austrian Monopsony Theory

Raoul — Wed, 19 Dec 2012 18:20:50 GMT

I read it some weeks ago. I found it interesting but I wonder how it fits with the doctrine of the imputation of monopoly gains to the specific factors (see MES, p677 and f.). Labor might be such a factor.

Austrian Monopsony Theory

Physiocrat — Wed, 19 Dec 2012 10:10:21 GMT

I wondered if any of you listened to Xavier Mera's talk at the Austrian Scholars Conference 2010 on Monopsony? His full paper is here.

His main claim seems to be that regulation and monopolisation of markets by government reduce the competition for the demand for labour and as such lowers their wage. He argues that owners of capital and benefit whilst labourers gain but I can't quite remember how.

Has anyone any thoughts on the matter?