In what ways would society be better off if the market were organized as a competitive rather than a monopoliz

[aznpharm]

In what ways would society be better off if the market were organized as a competitive rather than a monopolized market?

[simplicitus]

What a refreshing question. Most people, including economists, assume that the market is already organized as a competitive one.

If it were really the case that most firms were small and that there were many firms producing each type of good, then the world would look very different:

1. Essentially no advertising. Advertising is justified only if you can build the sort of product differentiation that allows you to charge more or gain a significant position in the market (i.e. become at least an oligopolist).

Think of the social benefits to less advertising: kids having better health to fewer junk-food meals; less influence of advertising dollars on media news presentations; people becoming less consumption-oriented and more satisfied with what they have; etc.

2. A completely different political system. At present, large corporations have two major paths of influencing the political process: they make major donations to the candidates and campaigns and they fund lobbyists.

When firms are small,they can't afford to do either of these, so the relative importance of big money in politics would decline dramatically.

3. A completely different employment situation. Smaller companies have significantly different employee relationships than do large companies. Also, small companies are generally more flexible than large. That suggests that certain kinds of change would be much easier.

To some extent, there is evidence for this in the behavior of Germany's economy:
http://lbbw.de/imperia/md/content/lbbwde...ates_e.pdf

Unfortunately, however attractive such a world would be, it is unstable. It is in every producer's interest to grow, to become a monopoly; and there are enough industries where the returns to scale either encourage or, at least, don't discourage this tendency to grow that there is no way that any modern society can operate primarily in the "perfect competition" domain.