Economic calculation and welfare considerations in monopoly and firm theory

Abstract

The critical reaction of Austrian economists to the neoclassical monopoly theory could be explained by two major facts: this theory lacks definitional clarity, necessary for any serious theoretical analysis, and it contains a dangerous theory of welfare, which is not only incorrect, but tries to justify an aggressive intervention of the state into the realm of purely voluntary market exchanges. The neoclassical theory was, curiously enough, accepted in its main points by Ludwig von Mises, who displaced however the perfect competition as standard for evaluating the “imperfection” of monopoly. We will analyze the explicit and implicit welfare criteria that Mises employs in his theory.economic calculation, monopoly, firm theory, welfare