With the voices in the debate over U.S. health care reform becoming even more shrill, and opponents decrying the prospective loss of free-market competition in the health care industry, I’ve been thinking a bit on the topic of monopolies.
In economics, a monopoly exists when a specific individual or an enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it, according to the late economist Milton Friedman. We generally think of monopolies as a bad thing; monopolists gain pricing power that enables exploitation of consumers. But the provision of goods and services in a capitalist economy is actually accomplished by a blend of free-market players and monopolies, as it must be. Some monopolies are necessary, and even good.