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What are the pros and cons of monopolies? Show more Show less

The word monopolies has negative connotations in economic history, but recently monopolies have been praised by people such as Warren Buffett and Peter Thiel. The arguments for and against are not new, but now they have better empirical support.

Monopolies are good for the economy Show more Show less

Monopolies provide capital for R&D and incentives to entrepreneurs.
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Monopolies can invest in innovation

Perfect competition erodes returns leaving little for R&D

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The Argument

If all industries were perfectly competitive, there would be no excess profit to dedicate to investment and R&D. Perfectly competitive industries also lead to boom/bust dynamics as ease of entry and exit lead to oversupply when prices are high and undersupply when prices are low. Monopoly markets create excess capital that can be funneled back into R&D and innovation.

Counter arguments

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Rejecting the premises

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This page was last edited on Sunday, 4 Nov 2018 at 16:58 UTC