"general public." Perhaps because I am a relic of an earlier era, I project into the future a history in which pressures from the side of political institutions, as well as the market, have been an indispensable element in shaping the evolution of corporate structure and behavior and moving it in a more socially desirable direction.
There are no precise measures of the extent of competition or its converse, monopoly power, in the markets of an economy, but quantitative indicators that can be compared over time do exist. 1 The most widely available important measure is the concentration ratio, which measures the degree to which a small number of firms (four or eight) dominate a market. A high concentration ratio is not itself a measure of monopoly power, but a low one is a more certain sign of competition. 2
The most recent comprehensive set of measures of the trend in monopoly and competition in U.S. markets was made by W. G. Shepherd. 3 His findings are summarized in Tables 1.1 and 1.2. They show a small increase in the share of economic activity accounted for by competitive markets in the U.S. economy between 1939 and 1958, and a substantial increase between 1958 and 1980. Shepherd explains the change as the result of three forces: increased import competition, antitrust action, and deregulation. The interplay of the last two was hard to disentangle; together they outweighed the changes due to import competition. A more recent study, carrying the measures forward to 1987, shows a slight increase in the share of concentrated industries, but not enough to suggest a reversal of the broad trend. 4
Several sets of data show the size and industrial distribution of business firms in the United States. One major source of data on the activities of businesses distributed by size is the Statistics of Income, based on income tax returns. In 1990, the most recent year for which complete data are available, 20 million business firms filed income tax returns. 5Table 1.3 shows the distribution of these firms by industry group, form of organization, and