MONOPOLY CAPITAL TilE TENDENCY OF SURPLUS TO RISE
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the competitive price system for granted and seeking to explore ·:
the consequences of certain new, and in many ways more real- .
istic and relevant, assumptions at the macro-economic level.
The reasons for this increasingly pronounced divorce be-
tween micro and macro theories are to be sought in the apolo-
getic character of bourgeois economics. As we shall see, the
effects of a tho1·oughgoing reintegration of the two levels of
analysis the substitution of a monopolistic price system for the
traditional competitive system, and the analysis of its implica-
tions for the whole economy are nothing short of devastating
to capitalism's claims to be considered a rational social order
which serves to promote the welfare and happiness of its mem- .·•
hers. Since a major concern of bourgeois economics has long '
been to support these claims, economists have naturally shown
no enthusiasm for following a course that ends by demonstrat-
ing their falsity.
There have of cot11·se been exceptions, but as usual in such
cases their work has received little of the attention it deserves.
The leader in reintegrating micro and macro theories was
Michal Kalecki who not only ''discovered the General Theory
[of Keynes] independently''2 but also was the first to include
what he called the ''deg1·ee of monopoly'' in his overall model
of the economy.:{ A fu1·ther long step in the same direction,
which owed much to Kalecki's influence, was Josef Steindl's
Maturity and Stagnation in American Capitalism ( 1952). And
anyone familiar with the work of Kalecki and Steindl will
i·eadily recognize that the authors of the present work owe a
g1·eat deal to them. If we have not quoted them more often or
made more direct use of their theoretical formulations the rea-
' each other. When one of them varies its price, the effect will
son is that for our purposes we have found a different approach
and form of presentation more convenient and usable.
2
Joan Robinson, Economic Philosophy, London, 1962, p. 93.
a Kalecki's path-breaking works, Essays in the Theory of Economic
Flucti1ations and Studies in Economic Dyna1nics, were published in 1939
and 1943. His Theory of Economic Dynamics, London, 1954, is a sort of
combined and revised second edition of the two earlier works.
3
When we say that giant corporations are price makers, we
n1 ean that they can and do choose what prices to charge for
their products. There are of course limits to their freedom of
choice: above and below certain prices it would be preferable
to discontinue p1·oduction altogether. But typically the range
of choice is wide. What determines which prices will be
charged within this range?
The simplest answer is that given by traditional monopoly
theory. A monopolist is defined as the only seller of a commod-
ity for which there are no substitutes. As he varies his price
from higher to lower, people will buy more of his product but
not at the expense of a similar product of a rival seller. Since no
other seller will be directly affected by the variation of the
monopolist's price, none will have any incentive to react or
retaliate. Under these circumstances, the solution to the mo-
nopolist's problem is simple: he will lower his price to the point
where the addition to his revenue from selling an extra unit
(taking account of the fact that the price for all previous units
also goes down) exactly equals the addition to his costs in-
volved in producing an extra unit. Up to this point, producing
and selling an additional unit brings in more revenue than it
adds to costs; beyond this point, the reverse is true. Hence this
point defines th9 price and output which maximize the monop-
olist's profit. I
The typical giant corporation, however, is not a monopolist
in this sense. Rather, it is one of several corporations producing
commodities which are more or less adequate substitutes for
immediately be felt by the others. If firm A lowers its price,
some new demand may be tapped, but the main effect will be
to attract customers away from firms B, C, and D. The latter,
not willing to give up their business to A, will retaliate by
lowering their prices, perhaps even undercutting A. While A's
original move was made in the expectation of increasing its