Competition, Coordination and Diversity

Competition, Coordination and Diversity

From the Firm to Economic Integration

New Thinking in Political Economy series

Pascal Salin

Competition, or the freedom to enter into a market, contributes greatly to the differentiation of human activities and therefore to economic progress. This fascinating book highlights the similarities between human systems at both the micro and macro level, and demonstrates how competition can positively affect the economic workings of firms and countries.

Chapter 3: Cartels as efficient productive structures

Pascal Salin

Subjects: economics and finance, austrian economics


Cartels are considered as specific productive structures that allow producers to exert a monopoly power. But this traditional link between cartels and monopoly power is debatable. In fact, the evaluation of the working of cartels is closely linked to the theory of competition and monopolies which one adopts. Thus, Murray Rothbard has made breakthrough contributions by persuasively showing that there is no monopoly power as far as there are only voluntary arrangements. We agree with such an approach and we consider that freedom of entry in production is the only relevant criterion to evaluate productive structures, so that one might dismiss as irrelevant all the traditional conditions of the pure and perfect competition theory. In the present chapter we will not address this general debate about competition and monopolies. Our precise aim is rather to look for the specific characteristics of cartels and to evaluate them under the light of our approach of competition. Cartels are generally considered negatively as formal arrangements to restrict production. After having discussed this approach we explain why cartels rather play a positive role in meeting some specific demands of the market. As a consequence they modify the frontier between the firm and the market.

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