Adam Smith on Monopoly Theory. Making good a lacuna


  • A previous version of this manuscript was presented at the 17th Annual Conference of the European Society for the History of Economic Thought, Saint-Petersburg, Russia, 17–19 May 2012 and at IX Annual Conference of the Italian Association for the History of Political Economy (STOREP), Padua, Italy, 1–3 June 2012.


This article analyses Adam Smith's views on monopoly by focusing on Book IV and V of The Wealth of Nations. It argues that the majority of scholars have assessed Smith's analysis of monopoly starting from premises different from those, actually though implicitly, used by Smith. We show that Smith makes use of the word ‘monopoly’ to refer to a heterogeneous collection of market outcomes, besides that of a single seller market, and that Smith's account of monopolists' behaviour is richer than that provided by later theorists. We also show that Smith was aware of the growth-retarding effect of monopoly and urged State regulation.