Ten Principles of Economics - Part 34. Economics is the study of how society manages its scarce resources. In most societies, resources are allocated not by a single central planner but through the combined actions of millions of households and firms. Economists therefore study how people make decisions: how much they work, what they buy, how much they save, and how they invest their savings. Economists also study how people interact with one another. | CHAPTER 15 MONOPOLY 341 probably be arrested for price-fixing if they ever held an official meeting in America. Most cable TV companies have government-issued licenses that keep competitors out. Thus this business supports the hypothesis offered I think by George Stigler that private monopolies are not sustainable for long unless they have the weight of government behind them. The rapid escalation of prices and the limitations on services seem however to be getting customers and their congressional representatives progressively more annoyed. Thus it would not be surprising if legislative action leads soon to a deterioration of the cable companies monopoly power. . . . This fear about the future diminishes the claim of this otherwise worthy contestant for the first annual prize. Officials of Ivy League universities have been able to meet in semi-public forums to set rules that determine prices of admission tuition less financial aid as a function of applicant characteristics especially financial resources. In some cases the schools pooled information to agree in advance on the right price to charge a specific customer. Airlines and other industries that wish to price discriminate can only dream about this kind of setup. Moreover the universities have more or less successfully applied a high moral tone to the process Rich applicants especially smart rich applicants are charged more than the competitive price for schooling in order to subsidize the smart poor but it is unclear why this subsidy should come from the smart rich rather than from taxpayers in general. In any event the universities enviable cartel position has been damaged by the unenlightened Justice Department which argued that the price-setting meetings were a violation of antitrust laws. Since most of the universities involved have agreed to stop these practices it may be that future prices for private higher education will come closer to being competitively determined. The final contestant the NCAA has
