Either Brown is prevented from offering his services to the community, or his goods are kept out of the market place, or a tax is levied on his improved machinery—or maybe a labor union prevents him from using it. It is by force that Smith retains his comfortable monopoly position; it is by force that competition is prevented from enriching the market place.
It is an odd circumstance that such scarcity-producing measures are not self-enforcing, simply because the monopoly impulse is counterbalanced by the stronger urge of the human for abundance, and the conflict results in lawbreaking by the very law passers. Thus comes the practice of smuggling, of tax evasion, of bootlegging, as well as the resort to substitutes for the product made scarce by monopoly. It is not surprising that Smith's neighbors, who helped him avoid competition, avail themselves by devious methods of Brown's services.
When a monopoly position is achieved, when competition is eliminated or restrained, competence has a new meaning. It no longer designates a standard of performance fixed in the market place. The monopolist, the one who controls the supply of a desirable commodity or service, regulates his performance by a neat formula: the highest price which will yield him the highest net profit. If he increases the output beyond a predetermined point, he must lower the price so as to induce greater consumption, and nothing is gained. If he increases the price, consumption will fall and so will his net profit. Competence in a monopoly therefore consists in finding (by the trial-and-error method) the exact profit-yielding ratio between price and performance. The profit-and-loss statement of a monopoly business reflects only in part the service it has rendered Society; it also includes an
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