Knowledge that Transforms

This paper presents a model and some highly tentative empirical estimates of the social costs of monopoly and monopoly-inducing regulation in the United States. Unlike the previous studies, it assumes that competition to obtain a monopoly results in the transformation of expected monopoly profits into social costs. A major conclusion is that public regulation is probably a larger source of social costs than private monopoly. The implications of the analysis for several public policy issues, such as appropriate policy toward mergers and price discrimination, are also discussed.

This paper exploits a powerful analytical tool expounded by H. G. Johnson--the long-run transformation curve--in order to recast growth theory in the two-sector model in diagrammatic terms. Stability is investigated under an exhaustive list of savings assumptions. It offers the results of growth theory to nonmathematical economists who know the rudiments of linear programming geometry and also suggests interesting observations concerning, for instance, the need to subsidize investment for long-run utility maximization, the distinction between two types of instability occurring in the two-sector model, the likely gains of workers from the coexistence of capitalists in two-class models, etc.