Are monopoly profits essential for higher innovation and economic growth?

Answer 1

No, just the reverse.

Monopolist have no direct interest in innovation as this would reduce the profit, the capacity of the production is not oriented on the market demand but by the optimum investment and the utilization is not set at the maximum output but by the maximum profit (which is always lower than the maximum output). They have no interest to introduce a competing new product (or will do only very slowly) as this reduces short term the maximum profit by research and investment in new capacities and at the same time reduces the value and output of the existing production.

The more competition the better: even if some companies produce the same product they will set the production output to the maximum as long as the cost of the last produced unit is lower than the production cost of this quantity. If the technology is free other competitors will invest in new capacity as long as there is an expected profit and they will invest more in research to find new technologies to reduce their production costs. This means the prices will be lower, more people can consume the product and more surplus money will be available for other choices which then triggers more investment into new product lines.

The extreme is "constructive destruction" (by Hayek) in which an old technology is replaced by a compete new one (e.g. Cell phones are more and more replacing land line phones. Years ago AT&T had a monopol in the US for phonelines and would have had never an interest in a technology which devalued their business, after the break up in the "baby bells" innovation had a huge jump forward.)

A good example is the US car manufacturing industry: in the 50's there were the big three GM/Ford/Chrysler which dominated the market, this was an oligopolistic situation but together they behaved as nearly a monopol. Today we have a large number of companies offering cars, a larger range of models to choose from and lower prices (in relation to the income).

There is one legal "monopoly" due by patent protection whic gives companies for a certain time (usually 7 years) to explore patents. See the Pharmaceutcal market: as long as a product is patented the prices are high (and the profits), after the patent expires and the competition starts production the prices fall significany (and the original company reduces the prices and its profits significantly).

(Ther is a huge amount of math involved to proof this)

Answer 2

There are different kinds of monopolies, If a firm is a monopoly because they control resources, or access their monopoly profit retard not increase growth. Other companies like 3M earn monopoly profits by producing new innovative products. Since the products are copied and the price driven down, they must always have something new in the pipeline. In technology patents are not really much of a protection because the patent is on process not product. Drug companies also earn monopoly profits but their patents are protected by FDA approval, so they need to innovate less than 3M to earn monopoly profits.

Answer 3

Essential for higher innovation? Monopoly = anti-innovation due to a non-competetive atmosphere.

Essential for economic growth?... Economic growth in the sense that the rich get richer, and the poor get poorer, then yes. The Dow Jones is not an indicator of society well-being though. It's just an indicator of how rich the rich are really. Yay for them.

Even with non-monoply, so-called competitive markets, they are used as a tool of control and sustainability of global economy, especially in end-consumer commodities. Elitist society.
Oil comes to mind.
Record prices.
Record profits.
Extra money sucked out of the economy to be routed back to capital investment, creating jobs, growth, blah blah blah. 95% of us screwed out of something in reality.

Answer 4

Not always.

Usually, when firms, people are competing they try to be more productive to beat the competitors.

Monopolist has no competitor, so, it might keep its old technology to produce the output and still get the higher profit.

Answer 5

Yes-If you had ever played the game of the same name this would be crystal. In order to create a better economy more money must be held in one place the more divided the wealth the more chaos there is.

Answer 6

NO just CORPORATE GREED.