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The ‘Welfare Loss from Monopoly’ Re-visited

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Abstract

In a 1954 paper, A.C. Harberger claimed that the welfare loss from monopoly in the United States was less than .1% of national income over 1924-1928. This and later claims of low monopoly welfare loss led to the theory of rent seeking that argued for a second loss equal to part or all of the economic profit. Here I identify a third loss that results when high market competition gives rise to low political support. This is most likely when the inclusiveness of a political system is low, but we find a surprisingly high welfare loss in a political system with only a moderate departure from complete inclusiveness.

Suggested Citation

  • Richard Carson, 2020. "The ‘Welfare Loss from Monopoly’ Re-visited," Carleton Economic Papers 20-13, Carleton University, Department of Economics, revised Apr 2021.
  • Handle: RePEc:car:carecp:20-13
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    References listed on IDEAS

    as
    1. Posner, Richard A, 1975. "The Social Costs of Monopoly and Regulation," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 807-827, August.
    2. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
    3. Ignacio Del Rosal, 2011. "The Empirical Measurement Of Rent‐Seeking Costs," Journal of Economic Surveys, Wiley Blackwell, vol. 25(2), pages 298-325, April.
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    More about this item

    Keywords

    Efficiency; Inclusiveness; Political Support; Rent Seeking.;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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