#Natural monopoly economics definition professional#
#Natural monopoly economics definition series#

In the first edition of Samuelson's textbook (Samuelson 1948 ), and until the end of the 1970s, natural monopoly was considered to occur in cases where economies of scale exist over the entire range of market demand. Samuelson's textbook characterizes natural monopoly as 'decreasing average cost over the relevant range of demand', crystallizing the focus on economies of scale. Samuelson famously picked up the ball from Marshall, Edgeworth, Pigou and others to embed the modern mathematical, formal approach to economic theory that would go on to define economic theory for the rest of the 20th century. 1948 is a landmark year, when Paul Samuelson's economics textbook is first published. Pigou's codification and formalization of welfare economics in the 1920s.

This period is the height of original work in neoclassical economics, carrying forward the foundational synthesis work of Alfred Marshall in the 1880s-1890s, through A.C.

#Natural monopoly economics definition series#

The intellectual history I explored in the first part of this series highlighted the natural monopoly concept's evolution up to about 1948.

#Natural monopoly economics definition professional#

Whether you are a consumer, an industry professional in these industries, a regulator or policy maker, or a policy expert, knowing what does and does not constitute natural monopoly will be a useful tool for thinking about the policy implications of dynamic innovation. Some people have been arguing that tech companies should be regulated as utilities, using a natural monopoly argument (they're incorrect, again a topic for another time. Technological change enabled the telecommunications industry to evolve away from being a natural monopoly, and the electricity industry is in the process of doing the same. It affects you if you are involved with consumption or production of electricity or of technology platforms, and that's all of us! I'd like to pick up the thread of natural monopoly theory that I started to spin a couple of weeks ago, motivated by Manuela Mosca's excellent article on the intellectual history of natural monopoly theory, apply this question to electricity, and drop some hints about natural monopoly theory and technology platforms but leave that topic for another day. This question of what constitutes a natural monopoly is more important today than you may realize.