Smith's opinion of the views Theil offers in his bookMarket forces ensure production of right goods and services. The price resulting from competition would equal the cost of productions in the long run. However, Thiel is of the opinion that under the perfect competition, business tends to be so focused on the current margins to a level that it cannot possibly have a long term plan. Its only monopoly profits that can allow a business to transcend the daily survival struggle. Thiel illustrates that competition can make people so strong in whatever they are competing. Competition ends up making one focuses so much on what the other does till one lose sight of what is important. Competition requires a group of resource owners, a large number of sellers and free movement of resources between industries. However, the most positive aspect of competition in the market is that, producers would try to outdo each other. The competition will result to prices coming down to the lowest possible level implying minimal profit for producers.
Still Without enough competition producers would end up with more profit. The status would attract more firms bringing down prices. All this still ends up benefitting the consumer without any inventions. Thiel view contradicts this aspect. To him, competition is not a virtue, but rather the antithesis of capitalism since it crushes margin and erodes profits to the point of no innovations. Capitalism and competition do not fall on the same side in the market. Capitalism based on the accumulation of capital but for perfect competition; all profits accrued get competed away. However, capitalism should be rational. It should discover the kind of employment that suits the society interest. Employment is mainly through distribution of self and local decision makings. Therefore through competition, capitalism identifies good directions for societies to organize their energies and relieve governments from managing economies.While there's great respect to peters keen intellectual capabilities, and his great provocations towards establishment of educations reforms, his argument for the social benefit of monopolies is totally absurd. It is true securing a monopoly is a great thing as anybody would want market domination that would enable strong profitability. Taking look at most recent cases in monopolies, monopolies electricity led to control in lax and high rise in pricing. Microsoft is also a company that is dependent and not innovative. The company has had a flat stock price for the last ten years.There's a great belief in entrepreneurial capitalism.
However, those who favor innovation face structural consequences related to monopolistic power. Thiel quotes in his book, that progress is driven by monopolies since the promise of even a decade provides a powerful morale for innovation. The monopolies continue with innovation as the profits enable them to finance ambitious projects and make long –term plans.In his support of the values of monopolies uses Google Company as an example. Most important thing to note is that before it established itself Google went through a difficult part of history. Currently, the employees are well paid, and the level of experiments and innovations has gone down. The decline in the culture of innovation is typical for the monopolies. The occurrence is because these companies have got little incentive to change things and doesn't engage in risk taking. It is the consumers that ultimately lose.Monopolistic markets also destroy the idea of capitalism. This occurrence is because monopolies tend to be less efficient as they have no real competitors. Just like the case of Facebook and the Google Company, which Thiel features, the businesses get relaxed as long as they continue making profits. Those who run monopolistic business end up running short of attention and vigilances much hard work is not needed to guard the company's gains. Capitalism reliance on competition and efficiency is, therefore, completely contradicted by the concept of monopoly.
Furthermore, a monopoly that is either granted to a trading company or to an individual share the same effect as a secret. Through under-stocking the market, the monopolist sells their commodities above natural price. This price constitutes the price of free competition. The statutes of apprenticeship and exclusive privilege of the corporation and all those laws which restrain factors like employment, competition might get into them in a small number. The corporations portray enlarged monopolies and may frequently or even in whole classes of employments maintain the market price of some products above the natural price. The enhancements of the price could be as long as the police regulations that give occasion to them. However, Thiel does not view tendency of monopoly businesses to holding back progress. According to him, the progress history is that of better monopoly business replacing the old businesses. The mere monopoly power possession and the concomitant charging of monopoly prices, apart from being an important element of the free-market system are also unlawful. In Thiel view, monopolies do deserve their bad reputations in the static world. On the other hand when monopoly is rewarded for innovation then the person involved in creating the monopoly is not creating artificial scarcity, as in the cases of intellectual property. From this sense, the idea that monopoly as a tool to create new things in a dynamic world is achieved.
Works Cited
Cropsey, Joseph. Polity and economy: an interpretation of the principles of Adam Smith. Westport: Greenwood Press, 1977. Print.
Fine, Ben, and Andy Murfin. Macroeconomics and monopoly capitalism. New York: St. Martin's Press, 1984. Print.
