Published by EH.Net (April 2019)

Manuela Mosca, Monopoly Power and Competition: The Italian Marginalist Perspective. Cheltenham, UK: Edward Elgar, 2018. vi + 242 pp. $125 (hardcover), ISBN: 978-1-78100-370-1.

Reviewed for EH.Net by Alain Marciano, Department of Economics, Université de Montpellier and MRE.

For good or bad reasons, some themes have received a lot of attention from historians of economic thought, while others have been less studied and still others have never been discussed. This is the case with the sources of market or monopoly power. At least this was the case before the publication of Manuela Mosca’s latest book, Monopoly Power and Competition: The Italian Marginalist Perspective. Now a gap has been filled. This book is the first to recount the history of what the economists of the nineteenth century wrote on monopoly power and its causes. No one had done that before her. If it were only for that reason, Manuela Mosca’s book would have to be read.

What makes it even more interesting is the focus of her book: namely, the tradition of the Italian marginalists. Mosca indeed demonstrates that Vilfredo Pareto, Maffeo Pantaleoni, Antonio de Viti de Marco and Enrico Barone were the first to present a theory of the sources and causes of market or monopoly power. Thus, Mosca’s book tells a story that has never been told by presenting a tradition of economists who were important — she reminds us that Joseph Schumpeter described these economists as “second to none” — but who remain relatively ignored. Actually, one of the main goals and main achievements of Mosca’s book is “to expand the existing awareness of how extraordinarily rich their theoretical contribution was” (p. 3). For these two reasons, Monopoly Power and Competition is an interesting and particularly useful book.

In the first chapter, Mosca places her “book within the existing panorama of the secondary literature” (p. 5) and then demonstrates why an understanding of monopoly power could not be found in the works of the classical economists but rather had to wait for the marginalists and, more specifically, the Italian marginalists.

The next two chapters are devoted to an analysis of their theories — the analysis of their concept of competition (chapter 2) and their analysis of the causes of monopoly power (chapter 3). Certainly, Pareto’s analysis of competition is widely known. Mosca notes, however, that “[a]part from Pareto, the other three economists appear rather seldom in the secondary literature on the history of competition theory” (p. 75). This was a mistake, especially for Pantaleoni — who had “identified all the conditions for the achievement of a competitive equilibrium” in 1882 (p. 76) — and Barone — who “produce[d] the weightiest and most unexpected contribution to the theory of competition” (p. 75) of the four. These three scholars had, in other words, proposed quite sophisticated theories of competition. (This was not the case of de Viti de Marco: interested as he was in public finance, he was less concerned by theorizing competition than the others.)

One point deserves particular attention: these four economists seemed to consider competition as a process. To them, the “reality [is] dynamic” (p. 118). And their purpose was to “formalize the dynamic theory of competition inherited from the classical economists” (p. 118). Indeed, the Italian marginalists “never decided to definitively abandon the classical dynamic idea of competition in favour of perfectly competitive equilibrium” (p. 79-80). They had an incremental conception of knowledge.

Now, one easily understands that no process can be immediately complete or perfect. There are always delays in the adjustment of resources. Pantaleoni was the one who insisted that “slow down adjustment” was one of the causes of market power; other causes were “the absence of the conditions for the long-run competitive equilibrium” and “the introduction of innovations” (p. 74).

Thus, one can already find some causes of monopoly power in the Italian marginalists’ theories of competition. They also identified some of these causes in their analysis of different forms of markets — in particular, they proposed a theory of oligopolistic markets — showing how the different structural and strategic barriers would generate market power. This is what Mosca discusses in the third chapter of her book. She does not only detail the theoretical insights these economists had, but also insists that their interest in these issues was “sparked” by “the rapidly changing nature of Italian industry and the government policies introduced to deal with these changes” (p. 83). In other words, these economists were not cloistered in ivory towers. This is actually one of the claims to which Mosca seems to be most attached. She discusses it further in the last two chapters.

That these economists were never far from the real world can be viewed by the fact that they did not develop theories for the sake of developing theories. They were interested in and concerned by “real-world issues” (p. 122). Mosca thus presents “some of the concrete occasions when the four economists used the concepts of competition and monopoly power” (p. 129). These “occasions” were as diverse, and as “outside the boundaries of the economic realm” (p. 120) as “women” and gender issues — besides de Viti de Marco, the three others seemed to have been rather unkind to women — or the Great War. To Mosca, this is the evidence that they were “applied economists” (p. 122-23), as she explains in the fourth chapter of the book. But that is not all in terms of interest for the real world. The Italian marginalists did not only apply their theories. They were also, as Mosca shows in the fifth chapter, “men of action” (p. 164). They were militants — and the main theme of their militancy was free trade and free markets; they were indeed convinced that marginalism was a means to promote free markets. Their militancy took the form of an involvement in politics — two of them were elected and two tried, but failed, to achieve office. It also took the form of what could be called intellectual entrepreneurship. They published the Giornale degli Economisti, which was a means for them to promote their ideas and to disseminate them nationally and internationally. From this perspective, as Mosca demonstrates, they were rather successful. It is somehow amazing to see the links these economists had with economists of other countries. We must thank Manuela Mosca for having written such an extensive and detailed presentation of their works.

Their works? One might be surprised that this review was written by systematically using the plural and by designating these economists as if they were talking with one voice. This should not be misunderstood as meaning that there were not differences among them. On the contrary, their theories differed, and radically on certain aspects. Mosca is very clear about that aspect — in particular in the conclusions of each chapter and in the general conclusion of the book, where she recapitulates the content of the chapter or book. The use of the third person plural pronoun is meant to convey another important point of Mosca’s book: she shows that they indeed were a group of scholars; they were very close to each other, had frequent interactions and exchanges. This is also one of the interesting lessons we learn from reading it and is another reason for which the book is worth reading.

Alain Marciano has published articles in History of Political Economy, the Journal of the History of Economic Thought, the European Journal of the History of Economic Thought and other economics journals.

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