Debunking economics

["John M. Legge" <jlegge@xxxxxxxxxx>]

I have attempted a numerical analysis of Steve's hypothesis in Chapter 6, page 68 that participants in a (nearly) perfect market will limit output, raising the price towards the monopoly price.

 

Assuming a cubic cost curve and a linear demand line, Steve's hypothesis does not necessarily hold for very costly products.  It seems to apply to less costly products, however.

 

If output is constrained to be integral, a monopoly can be more "efficient" than a nearly perfect market just because of the additional output.

 

In (relatively) realistic oligopoly models using constant variable cost competition does appear to reduce prices somewhat, according to Stephen Martin's forthcoming book, in which he shows that Cournot oligopolies are, in general, stable (so farewell "as if" and contestability).  Martin will include two pages of criticism of the Chicago "tight prior" assumption, so he is not a completely saturated neoclassical Economist.

 

In my own work, the difference between monopoly and Cournot competition is shown to be slight, partly because of the ubiquity of Sraffa-type barriers around each supplier, but also because realistic demand schedules are anything but linear.  I will publish when the current academic madhouse slows down,

 

JML