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21: Of Monopoly - Étienne Bonnot, Abbé de Condillac, Commerce and Government Considered in their Mutual Relationship [1776]

Edition used:

Commerce and Government Considered in their Mutual Relationship, translated by Shelagh Eltis, with an Introduction to His Life and Contribution to Economics by Shelagh Eltis and Walter Eltis (Indianapolis: Liberty Fund, 2008).

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


21

Of Monopoly

To be the sole seller is to create a monopoly. This word which has become odious should not always be. A great painter may sell his works alone, because he alone can create them.

He takes his wage to the highest point: it has no other regulation than the wealth of the admirers who are interested in his paintings.

Do you dream of being painted by him, because he makes perfect likenesses, and always in fine style? He will ask a hundred louis for a portrait, or even more, if at this price people request more than he can paint. His interest is to earn plenty, while making few portraits; to make few, so as to make them better, and that way to secure his reputation all the more.

This price may appear exorbitant. However, it is not: it is the true price. It is ruled by an agreement made freely between the painter and the sitter, and no one is hurt. Are you not rich enough to pay a hundred louis for your portrait? Do not have it made, you can do without it. Are you rich enough? It is for you to see whether you prefer to keep your hundred louis or to exchange them for your portrait.

This price, because it is the true price, is based on the quantity in relation to the need. Here the need is the dream you have of being painted; and the quantity is one, since we assume just one painter who catches likenesses to your taste. Therefore the greater your fancy, the more the painter will be entitled to demand a very large wage from you. Should your portrait cost you a thousand louis it would not be dear, that is to say, above the true price.

One must not reason about the pleasures one obtains through fancy, whim, fashion in the same way as about those which are of absolute necessity. If you were the only corn merchant, and you made me pay a hundred francs the septier, you would not be able to say that you had sold it to me in accordance with an agreement freely entered into between us; it would be clear that I have been forced by need, and that you have cruelly abused your position. There is a monopoly which becomes detestable, since it is unjust.

In trade in essential goods, the price, when it is the true one, is permanent; and it is by that, as we have already noted, that it is recognised.

In trade in inessentials, the price is not at all permanent: it cannot be, it varies like fashions. Today one article is in vogue, tomorrow another. Soon, in place of one competitor there are several. So, compelled to limit himself to lower wages, he sells at a lower price what he previously sold at a high price. We have seen snuff-boxes of papier mâché at two or three louis which nowadays are at twenty-four sols. Despite this variation they have always been at their true price. It is a fact that the price of fancy goods cannot settle, and that it can be very high in comparison with that of necessities.

Since in the trade in necessities the true price is a permanent price, it is clear that it cannot live with monopoly, which would make it rise sharply stroke upon stroke. But if the person who is the sole seller causes prices to rise, multiplying the sellers will be enough to make them fall.

Now sellers will multiply of their own accord when no obstacles are placed in the way. As every type of trade offers a profit, it is not to be feared that this will not happen. If one leaves it free to happen, it will happen, and the number of merchants will grow, so long as carrying on the trade concurrently, they find enough profit to subsist. If they were to multiply too much, as must sometimes happen, a portion will abandon a trade which is not profitable to them, and exactly the right number of merchants will remain. Once more one must not interfere: if there are monopolists, freedom will purge society of them.

Every seller wants to gain, and to gain as much as he can. There is not one who would not like to push aside all his rivals and sell alone if he could.

Every purchaser would like to buy at the lowest price, and he would wish that the sellers, vying with each other, would offer him goods at a discount.

However, each seller in one capacity is a buyer in another. If it matters to him to be without rivals, it matters to him that the sellers, from whom he buys, have plenty of them; and it is no less important to the latter that he is not alone.

From these contrary interests, it follows that the interest of all is not to sell at the highest price and buy at the lowest, but to sell and buy at the true price. This true price is thus the only one which reconciles the interests of all the members of society. Now it will only be able to establish itself when, in every branch of trade, there is the greatest possible number of merchants.

As we have noticed, it is only great artists, unique of their kind, who can make a monopoly without injustice. By virtue of their talents they have the privilege of selling alone.

But when it is a matter of trade in essentials, where, happily, rare talents are not needed, I understand by monopolists a small number of merchants who buy and sell exclusively; and I say that there is monopoly, and in consequence injustice and disorder, whenever this number is not as large as it might be.

Nowadays all the commerce in Europe is therefore carried on by monopolists. I do not wish to speak of the customs, tolls and exclusive privileges which impede internal trade from province to province: we shall deal with these abuses elsewhere. I am only referring to the obstacles placed in the way of commerce between nation and nation.

When in France we prohibit the import of English goods, we reduce the number of merchants who would have sold to us; and in consequence our native merchants become monopolists, who sell at a higher price than they would have done if they had been selling alongside English merchants.

When we forbid export to England, we reduce for the English the number of merchants who would have sold to them; and in consequence those who sell to them become monopolists, who make them pay for goods at a higher price than they would have done if they had sold alongside our merchants.

Let us apply this reasoning everywhere that the government forbids exporting and importing, and we shall recognise that the nations seem to have forgotten their true interests, in order to concern themselves merely with the ways of gaining the greatest profits for monopolist merchants.

Indeed, when we ban import we reduce the number of those who sell to us and buy everything at the highest price; when we ban export, we reduce the number of those who buy from us and we sell everything at the lowest price. That is to say that we are never at the true price. We are above it when we buy expensively, and below it when we sell cheaply. Certainly it is not the way to carry on a profitable trade. However, it was in the hope of buying cheaply and selling dearly that these prohibitions were conceived. The nations sought mutually to hurt each other, and they each hurt themselves. It is only competition between the greatest possible number of buyers and sellers which can place goods at their true price, that is to say, at that price which, being equally advantageous for every nation, cuts out excessive price and cheapness at one and the same time.