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… is from page 13 of John Bates Clark [2]’s 1901 volume, The Control of Trusts [3]:
Let any combination of producers raise the prices beyond a certain limit, and it will encounter this difficulty. The new mills that will spring into existence will break down prices; and the fear of these new mills, without their actual coming, is often enough to keep prices from rising to an extortionate height. The mill that has never been built is already a power in the market; for if it surely will be built under certain conditions, the effect of this certainly is to keep prices down.
DBx: Yep.
Of course, in J.B. Clark’s day – he died at the age of 91 in 1938 – the mythological “monopolists” were manufacturing firms, or “mills.” Today the mythological “monopolists” are tech ‘giants’ such as Google and Facebook. Yet that which Clark observed to hold true more than a century ago holds true today.
Indeed, the speed with which technology improves today means that the threat posed to today’s “dominant monopolists” from potential competitors is likely even greater than was the threat that potential competitors posed to existing “dominant monopolists” in the 19th and 20th centuries.