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Monopolistic Competition and Economic Realism

Published online by Cambridge University Press:  07 November 2014

John M. Cassels
John M. Cassels*
Affiliation:
Harvard University
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Extract

From one of the outstanding theorists in the field of economics to-day, Professor Pigou himself, we have the statement that, if economics is to be more than “merely an amusing toy”, it must be “realistic”, in the sense that its “interest is concentrated upon the world known in experience”, and “fruit-bearing”, in the sense that its ultimate objective is to contribute to the attainment of “practical results in social improvement”. Few will disagree with a general statement of this sort; yet none of us can fail to be conscious of the difficulties involved in maintaining a really close and useful relationship between our theoretical analyses and the most urgent practical problems of the economic world around us. It is with these difficulties and with the effect upon them of recent theoretical developments that this paper is primarily concerned.

Type
Articles
Information
Canadian Journal of Economics and Political Science/Revue canadienne de economiques et science politique , Volume 3 , Issue 3 , August 1937 , pp. 376 - 393
Copyright
Copyright © Canadian Political Science Association 1937

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References

1 Economics of Welfare (London, 1924), pp. 4 and 6.Google Scholar

2 Chamberlin, E. H., The Theory of Monopolistic Competition (Harvard University Press, 1933).Google Scholar

3 Robinson, Joan, The Economics of Imperfect Competition (London, 1933).Google Scholar

4 Clapham, J. H., “On Empty Economic Boxes” (Economic Journal, 09, 1922, pp. 305–14).CrossRefGoogle Scholar

5 “The Laws of Returns under Competitive Conditions” (Economic Journal, 12, 1926, pp. 535–50).Google Scholar

6 Viner, Jacob, “Cost Curves and Supply Curves” (Zeitschrift für Nationalökonomie, 1932, p. 43).Google Scholar

7 Among these terms, “atomistic”, although least used, is in many ways the most satisfactory. As Chamberlin has pointed out, the term “perfect” suggests an absence of friction and a completeness of knowledge which are not intended to be implied. Against his own term, “pure”, however, it may be objected that it seems, to the lay reader at least, to suggest the quintessence of competitiveness rather than the insignificance in the market of each individual firm. Actually the aggressive selling policies and advertising campaigns which are characteristic of competition as it is conceived of by business-men can be adopted only where the conditions are to some extent monopolistic. “Atomistic” competition which is necessarily passive and impersonal as far as the marketing of the products is concerned, is seldom thought of by ordinary people as being competitive at all.

8 Following Chamberlin, the costs referred to are long-run costs, including normal competitive profits.

9 Chamberlin, , The Theory of Monopolistic Competition, p. 103.Google Scholar

10 Ibid., pp. 104-9.

11 “Some Notes on Ideal Output” (Economic Journal, 03, 1935).Google Scholar

12 The Economics of the Iron and Steel Industry (New York, 1937).Google Scholar

13 Published reports based on various investigations, among which especially noteworthy are: Report on the Bread Baking Industry, 1931; and Report on the Distribution of Anthracite Coal in Eastern Canada, 1936.

14 This is more fully treated in my article on “Monopolistic Competition and Excess Capacity” (Quarterly Journal of Economics, May, 1937).

15 Burns, , The Decline of Competition, pp. 5, 30–3, 60.Google Scholar

16 Theory of Monopolistic Competition, pp. 104 and 171.

17 Nourse, E. G. et al., America's Capacity to Produce (Washington, 1934).Google Scholar

18 Loeb, Harold, A Chart of Plenty (New York, 1935).Google Scholar

19 “Monopoly Power and Price Rigidities” (Quarterly Journal of Economics, 05, 1936, pp. 456–75).Google Scholar

20 See in this connection, Means, Gardner, “Industrial Prices and their Relative Inflexibility” (U.S. Senate Document, no. 13, 1935).Google Scholar