"Marshallian economics was a realm of beautiful symmetries. Supply and demand naturally reached an equilibrium, and workers were paid the precise value of what they contributed to production. So long as companies had to compete on the price and quality of their goods, consumers could force producers to make improvements by purchasing cheaper, superior goods from their competitors. The market would respond to consumers and the wealth of society would increase.
The snake to this Eden was monopoly. If a single producer captured enough market share, it could immunize itself from competition and force consumers to respond to its preferences — higher prices, inferior quality, suppressed innovation. Marshall recognized that most markets were not perfectly competitive. But like other thinkers of his day, he believed that these were passing flaws and that markets had a natural tendency toward competition. The market was almost always improving itself of its own accord; only conditions of pure monopoly could impede this progressive trend.
Economist Robinson turned Marshall’s framework on its head. Competition, she argued in her landmark 1933 book, “The Economics of Imperfect Competition,” wasn’t an on-off switch between pure monopoly and pure competition. A competitive market was not the normal state of affairs — it was a rare “special case.” Markets typically reached a state of “equilibrium” in which Marshall’s progressive improvements halted while exhibiting many of the flaws of a monopoly regime.
The most potent arrow in Robinson’s conceptual quiver was a new idea she called “monopsony.” A monopoly had always been understood to involve a single seller forcing its prices on powerless buyers, like the U.S. oil industry at the turn of the century. But buyers, Robinson observed, could enjoy the forbidden fruits of imperfect competition as well: If only one buyer for a good existed, then that buyer could dictate its price, no matter how many sellers might be competing for its purchases. This was monopsony.
Crucially, Robinson argued that workers, as sellers of their own labor, almost always faced monopsonistic exploitation from employers, the buyers of their labor. This technical point had a political edge: According to Robinson, workers were being chronically underpaid, even by the standards of fairness devised by the high priests of the free market.
Under classical conceptions of monopoly, economists and lawyers often interpreted labor unions as unfair barriers to competition. Instead of allowing employers to freely compete for individual workers, their reasoning went, unions forced them to negotiate with a cartel. In the 1920s, an influential Austrian economist, Ludwig von Mises, declared that the entire function of labor unions was to prevent fair competition for wages through the threat of “primitive violence” against strikebreakers.
But under Robinson’s framework, it was not unions that created competition problems in the market for labor; instead, labor markets were anti-competitive by their very nature, except in rare, special cases. In effect, she had reimagined competition policy as a labor-rights issue. The problems she exposed were not the excesses of a few over-the-top corporate behemoths, resolved with a few breakups and spinoffs. Monopsony, Robinson’s argued, is endemic to the labor market and demands an ongoing regulatory response throughout the economy.
A growing body of empirical literature indicates that Robinson’s conceptual insights were correct: Intensifying corporate concentration has suppressed worker wages over the past quarter-century. Imperfect competition is not only real but also appears to be intensifying. The economist Simcha Barkai pegs the figure at about $14,000 a year in lost wages for the typical worker.
The conservative Supreme Court Justice Brett Kavanaugh cited “monopsony” in a 2019 ruling against Apple; a recent investigation by House Democrats concluded that Amazon deploys monopsony power and that its warehouses tend “to depress wages” for warehouse and logistics workers when they enter a local market. In an era of historically weak organized labor and the accelerating concentration of job opportunities in a few big cities, much of the country faces a decline in potential buyers of labor and limited opportunities for redress through collective bargaining."
In Lithuania, monopsony is not discussed, but employers use it without remorse.
