Does the theory of monopolies include the fact that they will eventually collapse under their own weight?

Question

Anti-trust laws destroyed big businesses at the turn of the 20th century.  Oil being one of these...

Would these monopolies have failed at some point anyway?  I understand that AIG wasn't a monopoly, but it seems that these corporations get too big for their britches so to speak.  LTCM was a major disaster.  Enron the same thing.  Microsoft no longer has the hold it used to and before it was IBM.

The other consequence after anti-trust laws went into effect, was that oil (gas) became cheap and electric cars would have to wait to be competitively made for an hundred years.

. · Accepted Answer

The "Too big to fail" issue is a matter of great debate at the moment bearing in mind that the large Banks have wreaked such havoc in the economy and the global contagion this caused. Economies are dropping like flies as the effects ripple through. However, this was a fraudulent accounting problem, a political nod and wink and, in its simplest form- a lack of understanding as to what these complex financial products were about.

Outside of the banking sector, the Harvard Business Review published an article recently on "Stall Points" (Yale University Press) i.e. when a company grows too large and it starts to fail because of its sheer size. There are some links here:

http://stallpoints.executiveboard.com/ 

http://hbr.org/2008/03/when-growth-stalls/ar/1

I think the Banking/Insurance/Hedge Funds Sector needs to be separated from the Manufacturing sector when looking at the theory of monopoly and size. The Financial Sector growth has been created using false financial products, ignoring risk and leveraging to hell. It was not real.

Manufacturing, however, is real. Output can be measured easily. There are issues when a large manufacturing industry can fall flat on its face - after a period of sustained growth. Becoming a conglomerate was very fashionable at one time to diversify risk but that has its problems too. Anyway, the "Stall Points" articles argue that a lot of large corporation disasters can be avoided. Not sure I agree but it's worth a read.

Marvin the Martian · Answer

Yes, and there is an economic concept known as "optimum size", that is, the size at which a business can best perform at.

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Does the theory of monopolies include the fact that they will eventually collapse under their own weight?

2 Answers