[PEN-L:2432] Re: Economies of scale:

[ETCHISON.GC@xxxxxxxxxxxxxxxxxxx (GC-ETCHISON, MICHAEL)]

	Sharkey, The theory of Natural Monopoly, writes

	"John Stuart Mill, in 1848, was the first economist of note to speak of
natural monopolies."  He quotes from a 1926 ed. of Principles, p. 143.
He writes further, "A recent survey of the evolution of the concept of
natural monopoly may be found in Lowry (1973) [in Public Utility
Fortnightly, 11/8/73, pp. 1-7]."  I have just come back from our library
with that issue in hand, and find the article is actually pp. 17-23.
Lowry referred to the same Mill passage; to Thomas Henry Farrer, _The
State in Its relation to Trade_ (1883); and to Henry Carter Adams,
"Relation of the State to Industrial Action" (1887) (in _Two Essays by
Henry Carter Adams_, ed. Dorfman (1969)); and then writes "Although Mill,
Farrer, and Adams developed the basic theory underlying the natural
monopoly concept," it was AEA founder Richard T. Ely, in _Problems of
To-Day_ (1888), "who labeled and widely disseminated this concept."

	According to Nye, _Electrifying America_, the Electric Club (most of the
members of which were manufacturers, presidents of utilities, and
officers of the large financial houses of New York) was organized in
1886, and the National Electric Light Association (a far larger group,
which was primarily a commercial group), in 1885.  Six of the seven
officers of NELA were in the Electric Club in 1888.  I don't have at hand
Forrest McDonald's _Insull_, which may discuss Insull's role in getting
the notion of natural monopoly into play.

	 I have read somewhere that one of the fundamental purposes of the AEA's
founders was precisely to get "natural monopolies" under control.

Michael Etchison

[history of economics mine, not the PUCT's]