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Date: 2019-07-16 Page is: DBtxt001.php list0300-Concentration-of-economic-power-1

Definitions for TrueValueMetrics
Concentration of Economic Power

The history of economics suggests that the concentration of economic power is a norm in a competitive market oriented society ... but why is this?

There seem to be several different reasons for concentration of economic power ... some which benefit society and some that do not.

There are some advantages that emerge with scale ... an ability to realize economies of scale, and to do things that are impossible at a smaller scale.

But there also the ability to control the market in ways that do not benefit society. An efficient market is usually achieved by competition between many market participants on both the supply side and the demand side. As the participants grow, it becomes possible for the behavior of the large market actors to change the market in ways that reflect the interests of the large actor and are detrimental to others.

This has been recognized as a problem for way more than a century ... but the market system tolerates, and maybe even encourages the expansion of an individual company so that it eventually has huge economic power. This is not usually a good outcome for society ... but it might be.

Generally speaking the data needed for the analysis of socio-economic performance is not available to the public. Many assumptions have to be made to understand what prices ought to be in order for a company to have a reasonable rate of return on capital employed. Where a product has a high value to a customer ... a high price is possible ... and with a concentration of suppliers, and either oligopoly or monopoly of supply, then it is likely that the price will be high.



The text being discussed is available at


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