Markets & imperfect competition

Far too many students of economics are taught that markets and their tendency to clear at the equilibrium price and quantity are the bedrock basis of the modern economy. In fact, however it is the absence of such markets and the accompanying Walrasian equilibrium complete with the invisible auctioneer calling out prices to ensure a more or less perfect information system that is the norm.
Just look at the market for energy. OPEC a cartel operates according to the laws of oligopoly at minimum and monopoly at the maximum. Consumers rather than being sovereign are at the mercy of their local supplier who more times than not is one of the giant oligopoly oil companies who refine and retail the product. Here in Montreal everytime the international spot market for oil jumps because of the decisions of OPEC and the international traders and speculators prices rocket forward to new and dizzying heights. On the occasions where prices trend downward the adjustments appear to be slower . Prices once ratcheted upward appear to fall but not quite so far or as fast the international drop in the market price. There is also a regionally sensitive price system on the island of Montreal that appears to be based on the varying elasticity of demand for the product, higher in the west end than the eastern end of the island.Hence , the model of price discrimination seems more appropriate that that of perfect competition.

Keynesians and Post -Keynesians have been arguing the economics of imperfect competition and oligopoly ever since the days of Joan Robinson in the 1930s.

Joseph Stiglitz and other neo-Keynesians emphasis upon market frictions and information gaps stands in a long tradition that goes back to the days of Veblen. Galbraith made major contributions in this area as well.

A few neo-classical economists and economic historians with an interest in the structure of industry and institutional analysis have also paid considerable attention to the real economy.Alfred Chandler and   Charles Kindleberger   are good examples.

But their insights have largely not penetrated the policy front and the popular reception of economists among government policy makers. The explanation is clearly political, this being the age of neo-conservative dominance of the policy process. It is about time that we reinvigorated our competition policy and more aggressively advanced consumer interests. By doing so we could close the gap somewhat between theory and practice.