When we go a little bit further down the corporate hierarchy, and we move away from monopoly, we move to something called oligopoly. When there’s an oligopoly, we have a few companies who dominate a market and who, between them, subtly, because they have to be subtle about this, can control prices to ensure that they obtain massive profits at cost to us.
OK. At which point the usual test is, are we seeing excess profits? If not then despite the small number of players they’re not exercising market power because they’re not making excess nor economic profits.
It’s fairly simple.
Supermarkets almost certainly do that.
British supermarket net margins are in the 2 to 3% range. These are not excess profits.
20 years ago they were more like 6%, best in the world. Then Aldi and Lidl expanded. Competition destroys excess profits just as the books say.
Man’s ignorant.
This from a man who consistently insists that the answer to nearly every existing problem is to create a state owned monopoly.
The irony is surely lost on him.
The man is ignorant for sure but when you combine that with his proven predilection for evil you are faced with someone who is quite dangerous.
He advocated the introduction of state rationing during COVID and for him I think the environmental ‘crisis’ would provide the perfect cover to control people’s purchases.
Admittedly the only reason they can survive on 2% margin is the turnover. That 2% comes within days, while say a jeweler might need weeks or months to sell a piece.
Yeah, it’s net because they have to throw it out if it doesn’t sell. It’s another reason why there aren’t more supermarkets; managing waste so you actually get 2% instead of -2% is a real problem.
If you’re getting net -2% in a supermarket, the turnover means you very quickly end up upside down.
I miss the days when he was ranting about handbags and insisting that no one should drive a car larger than 1600cc -( the size of his Berlingo) Since he became a pretend” professor” he’s been churning out articles about economic terms which he obviously has no idea what he’s talking about and become more authoritarian and frankly, deluded. At least his earlier rants had comedic value.
Oligopoly.
Like public sector unions.
Ensuring excess profits for their members. Well we call it really high wages and incredible benefits but same/same.
Shouldn’t be allowed.
I’m quite certain that if you described Ritchie as a first-order thinker he’d take it as a compliment.
I agree that supermarkets are not an oligopoly, but the test is return on capital, not margin.
“are we seeing excess profits?”
A dangerous test as there are plenty people who think that any profit is excessive.
We should instead ask a completely different question: if there is a monopoly or oligipoly, why has this not been broken by competition? A common answer to this will be that there is excessive and unnecessary regulation prevening it, in which case the correct action is to reduce the regulation to the minimum necessary.