University of Glasgow, United Kingdom
Among economists in both America and Britain, the weight of opinion has always been strongly hostile to such practices as the fixing of producers' prices, the regulation of output, restrictive agreements with distributors and all the many devices by which newcomers may be kept out of an industry. It is true that there have been some dissentient voices. Schumpeter was prepared to argue that the greater security of a monopolistic position would be favourable to innovation,2 and such security could presumably be obtained not only by achieving a dominating position in a market but also by forming a restrictive agreement between a number of independent concerns. In Britain, the work of the Monopolies Commission was criticized with some force by the late Sir Henry Clay3 who was convinced that some of the practices generally held to be in restraint of trade were beneficial both to the industry concerned and to the economy as a whole. These views have won little support. There appears to be less difference of opinion among economists about cartels than there has been about monopolistic control by a single concern. A firm that accounts for a high proportion of an industry's output may admittedly have swollen profits but it is often conceded that it may also offer some compensation from the economies of scale. A cartel may also restrict and exploit, but in this case there is held to be no cost-reducing concentration of effort; on the contrary, a cartel may prevent such a development from taking place.
This is the verdict that has, I think, been fairly generally accepted. It can be regarded as abroad practical judgment which owes surprisingly little to the detailed analytical studies of "imperfectly competitive" or "monopolistically competitive" markets. Restrictive agreements have not been altogether ignored in these theories but have received