Monopoly Is Not a Game

One of the basic lessons of economics is that monopolies are bad news. When there’s only one company in a market, it can jack up prices to above their efficient level. That gives a big boost to profits, but results in too few people being able to afford to buy what the company is selling. Most markets are not monopolies, but a similar principle holds for situations where there are only a few companies, called oligopolies. A lack of players stifles competition, raising profits but lowering overall economic output.

It’s therefore natural to ask whether the U.S.’s subpar economic growth is caused by a decrease in competition, and in fact, a bunch of people have been suggesting this explanation lately. In an article entitled “Too much of a good thing?," the Economist cites high rates of profit, record levels of merger activity and increasing industrial concentration as evidence of reduced competition.