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Monopolies as “Mechanical Defects”: Frank H. Knight on Market Power*

Published online by Cambridge University Press:  11 June 2009

J. Patrick Raines  and
Clarence R. Jung
J. Patrick Raines
Affiliation:
University of Richmond, Virginia
Clarence R. Jung
Affiliation:
University of Richmond, Virginia
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Extract

This essay examines Frank Knight's view of monopolies in a market economy through an exegesis of his writings. A cogent development of Frank Knight's theory of monopolies is conspicuously absent in the economic literature. His prominence in the discipline and the influence his work has had on others establish his views as significant in the intellectural history of the theory of capitalist competition. The study focuses on Knight's characterization of monopolies and his views as to the appropriateness of coercive repressive regulatory policies. Also, capitalistic monopolies are discussed in the context of Knight's critical attitude toward economic and philosophic dogma and his disdain for centralized economic planning. The following section deals with the Knightian view of the nature of monopolies and categorization of types of monopolies. Then, the philosophical basis for Knight's position onmonopolies is presented. Specifically, the concentration of economic power in capitalism is explained in terms of Knight's perceptions of social reformers, static equilibrium analysis, and economic planning.

Type
Articles
Information
Journal of the History of Economic Thought , Volume 10 , Issue 2 , Fall 1988 , pp. 135 - 143
Copyright
Copyright © Cambridge University Press 1988

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References

1. Knight, Frank H., “The Price System and the Economic Process,” The Economic Organization (New York: Augustus M. Kelley Publishers, 1967): 91.Google Scholar

2. The Economic Organization was first privately published in 1933. Thus, it is interesting to note that Knight's views on the monopoly power conferred by product differentiation were published in the same year as Chamberlin's famous work. The Theory of Monopolistic Competition (Cambridge: Harvard University Press, 1933).Google Scholar

3. Knight, , The Economic Organization, p. 92.Google Scholar

4. Knight, Frank H., “The Sickness of Liberal Society,” Freedom and Reform (Indianapolis: Liberty Press, 1982): 452.Google Scholar

5. Ibid.

6. Knight, , The Economic Organization, p. 93.Google Scholar

7. Pigou, A.C., The Economics of Welfare (London: MacMillan, 1920): 240–256.Google Scholar

8. Knight, Frank H., “Fallacies in the Interpretation of Social Cost,” Quarterly Journal of Economics 38 (05 1924): 582–606.CrossRefGoogle Scholar

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10. Ibid.

11. Knight, Frank H., On the History and Method of Economics (Chicago: The University of Chicago Press. 1956): 28.Google Scholar

12. Ibid., p. 294.

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16. Knight, Frank H., “The Role of Principles in Economics and Politics,” American Economic Review (03, 1951): 29.Google Scholar

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20. Ibid., p. 20.

21. Ibid., p. 21.

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23. Ibid., p. 184.

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25. Ibid., p. 431.

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