From wikipedia: In economics, a monopsony (from Ancient Greek μόνος (monos) “single” + ὀψωνία (opsōnia) “purchase”) is a market form in which only one buyer faces many sellers. It is an example of imperfect competition, similar to a monopoly, in which only one seller faces many buyers.
This word is new to me. My instinct tells me that a monopsony is not any different from a monopoly since buying/selling are meaningless distinctions, rather you are trading one thing for another. To think of “selling” ones money for groceries rather than “buying” groceries seems to be more the result of conventional usage, since after all the two descriptions are equivalent.
I’m bringing it up because it seems to come up in anti-free market contexts, and I had never heard it before in any of the libertarian literature.
No. It’s one of those made-up issues that has almost no translation to reality. About the only thing I could foresee as plausible is an all-star athlete in some sport turns free agent and a bunch of other teams want said athlete.
The examples used on wikipedia are like a single employer (1 buyer) and many laborers (many sellers)
Critics of free market theory point out that even if you have the freedom to enter the market and become an employer there are setup costs to doing so which effectively discourage competition and result in “monopsony”
The example I remember from textbooks is Hospitals and Nurses. In that regard, it’s kind of akin to the geographical/resource monopolies that naturally arise (occasionally) due to a scarce resource being concentrated in one area (i.e., bauxite).
What the “monopsonist” critique imagines, is that the monopsonist has a degree of market power over the labor. Starting from square one, on a truly even, free-market playing field however, this argument isn’t as compelling. In a free, competitive market, it’s unlikely that an organization would become large enough (in most circumstances) to exercise this sort of power, since any time this course of action was a credible threat, some of the laborers could break off and form their own, competing business. Or someone else could independently start their own competing business.
Assume that a given resource is only available in one small part of the world, and that small part of the world is currently occupied & homesteaded by a legitimate “owner”. It’s effectively his, to do with as he pleases. To sell at whatever price he finds satisfactory.
For the record; there are substitutes for pretty much everything, so these substitutes (insofar as they are less effective) put an upper bound on the price he may command. In the real world, there is usually more than one single supplier of a resource, so even though geographically, Brand Y may be more costly/inconvenient than that asshole who owns Brand A, this competition also puts an upper-bound on the price Brand A may command.
The double-edged sword, for someone with a geographic/scarcity based monopoly, is that higher prices encourage competition and discovery, which will ultimately yield viable alternatives.
The Hospital is an illustrative example, because we’ve been conditioned to believe that a geographic area requires one large hospital. But why can’t a city/town/metro area have many different medical service providers, all offering various types of treatment (likely with some degree of overlap between and among them).
The wikipedia article actually has mainly government examples :D. This doesn’t preclude monopsony in the free market though…
Hehe, of course. They’re still claiming that there is imperfect competition because you need to raise capital to build your firm before you can enter the market.
Ha! And why is a large amount of capital necessary to enter the market? It couldn’t possibly be because of government regulations, licensing restrictions, and other artificial barriers to entry! Could it? Nah.
I think socialists will claim that even in the free market you still have to raise a lot of capital to open something like a factory, and thus there is imperfect competition. Therefore the almighty and wise state ought to have control over businesses to get around this problem.
The whole system with which we’re familiar is at best a jumping off point for hypothesizing how things might otherwise be. The trend in many arenas is towards smaller, quicker, more agile organizations and product development.
With that in mind, some people suggest that extremely capital-intensive factories would not be nearly as prevalent in a truly free market. Maybe the whole centralized, top-down factory model is obsolete, and only maintained as it were, by the State?
about hospitals: I understand that there are LAWS that prohibit someone from opening Hospital B next door to Hospital A. Sure that decreases competition, and gives Hospital A a monopoly. And Hospital A got his monopoly by getting the state to pass a law for his benefit. Is Socialism the cure for this? How?
Nobody says that ANYONE can compete with an existing factory. Of course only rich people can afford to. But there are plenty of those around, thank God. How will taking away the rich people’s money solve help things out?
“If you didn’t notice, I sock’d up. This was necessary because Irenicus unilaterally permabanned me without explanation and apparently without consultation with the other mods. For what? For criticizing Walter Block’s monopsony article, which I found to be uninformed and ignorant of dynamic monopsony?”