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In the December 17 issue of the New York Review of Books, one can kind a review Paul Krugman wrote about Saving Capitalism: For the Many, not the Few by Robert Reich. A large part of the review addresses the issue of what exactly is fueling the rampant inequality of today. Differences in education and access to technology are mentioned as possible culprits, but one particularly interesting suggestion was the idea that monopsony is fueling inequality. The article defines monopsony as market power in the labor markets. In other words, a monopsonist business firm can set their employees’ wages rather than letting “the invisible hand” make the decision.
With the evisceration and vilification of unions (unionization in the US is at 11%) and the apparent growing prominence of “right to work” legislation, the hypothesis that monopsony lies at the root of the inequality problem seems very convincing.
After learning about monopsony, I began to wonder whether there were comparable concepts relating to the other factors of production. Are there terms for a person/firm who has market power over land or entrepreneurship? What would an example of such power in the real world be? How could such power be contributing to this era’s rampant inequality?