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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 stimulate capitalism

Without monopoly type profits, there would be little incentive to innovate.

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The Argument

Supernormal profits lead to new entrants in industries and the desire to get rich. In many industries, the first mover may enjoy the benefits of coming up with a profitable idea. The lure of profits will drive others to enter later. Without monopoly type profits, there would be little incentive to innovate. In some cases, this initial monopoly is driven by patents/copyrights. Society has chosen to reward patents for centuries in order to motivate inventors to innovate. Research and development is costly and uncertain. Monopoly profits are a just reward for innovation.

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Rejecting the premises

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This page was last edited on Sunday, 4 Nov 2018 at 16:56 UTC