Editing Natural monopoly (section)

== History ==
{{Competition law}}
The development of the concept of natural monopoly is often attributed to [[John Stuart Mill]], who (writing before the [[marginalist revolution]]) believed that prices would reflect the costs of production in absence of an artificial or natural monopoly.<ref>''[[Principles of Political Economy]]'', Book IV 'Influence of the progress of society on production and distribution', Chapter 2 'Influence of the Progress of Industry and Population on Values and Prices', para. 2</ref> In ''[[Principles of Political Economy]]'' Mill criticised Smith's neglect<ref>''[[Wealth of Nations]]'' (1776) Book I, Chapter 10</ref> of an area that could explain wage disparity (the term itself was already in use in Smith's times, but with a slightly different meaning). Taking up the examples of professionals such as jewellers, physicians and lawyers, he said,<ref>''[[Principles of Political Economy]]'' Book II, Chapter XIV 'Of the Differences of Wages in different Employments', para. 13-4</ref>

<blockquote>The superiority of reward is not here the consequence of competition, but of its absence: not a compensation for disadvantages inherent in the employment, but an extra advantage; a kind of monopoly price, the effect not of a legal, but of what has been termed a natural monopoly... independently of... artificial monopolies [i.e. grants by government], there is a natural monopoly in favour of skilled labourers against the unskilled, which makes the difference of reward exceed, sometimes in a manifold proportion, what is sufficient merely to equalize their advantages. </blockquote>

Mill's initial use of the term concerned natural abilities. In contrast, common contemporary usage refers solely to market failure in a particular type of industry such as rail, post or electricity. Mill's development of the idea that 'what is true of labour, is true of capital'.<ref>''[[Principles of Political Economy]]'' Book II, Chapter XV, 'Of Profits', para. 9</ref> He continues;

<blockquote>All the natural monopolies (meaning thereby those which are created by circumstances, and not by law) which produce or aggravate the disparities in the remuneration of different kinds of labour, operate similarly between different employments of capital. If a business can only be advantageously carried on by a large capital, this in most countries limits so narrowly the class of persons who can enter into the employment, that they are enabled to keep their [[rate of profit]] above the general level. A trade may also, from the nature of the case, be confined to so few hands, that profits may admit of being kept up by a combination among the dealers. It is well known that even among so numerous a body as the London booksellers, this sort of combination long continued to exist. I have already mentioned the case of the gas and water companies.</blockquote>

Mill also applied the term to land, which can manifest a natural monopoly by virtue of it being the only land with a particular mineral, etc.<ref>''[[Principles of Political Economy]]'', Book II, Chapter XVI, "Of Rent", para. 2 and 16</ref> Furthermore, Mill referred to network industries, such as electricity and water supply, roads, rail and canals, as "practical monopolies", where "it is the part of the government, either to subject the business to reasonable conditions for the general advantage or to retain such power over it, that the profits of the monopoly may at least be obtained for the public."<ref>''[[Principles of Political Economy]]'', Book V, 'Of the Grounds and Limits of the Laisser-faire or Non-Interference Principle'</ref><ref>On subways, see also, {{cite book |last=McEachern |first=Willam A. |title=Economics: A Contemporary Introduction |publisher=Thomson South-Western |year=2005 |page=319}}</ref> So, a legal prohibition against non-government competitors is often advocated. Whereby the rates are not left to the market but are regulated by the government; maximising profits, and subsequently societal reinvestment.

For a discussion of the historical origins of the term 'natural monopoly' see Mosca.<ref>{{Cite journal|url=https://www.tandfonline.com/doi/abs/10.1080/09672560802037623?journalCode=rejh20|doi = 10.1080/09672560802037623|title = On the origins of the concept of natural monopoly: Economies of scale and competition|year = 2008|last1 = Mosca|first1 = Manuela|journal = The European Journal of the History of Economic Thought|volume = 15|issue = 2|pages = 317–353|s2cid = 154480729}}</ref>