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Examples of Good Monopolies
Up until now we have seen that in comparison with competitive companies, a monopoly produces very little at a very high cost and sells it for too much money. Given these three negative aspects, it is possible you will be tempted to say, “I hate monopolies”. If this were the case, you might be too quick to judge. In some cases, the benefits of monopolies compensate the costs.
Stimulating Innovation and Investment with Patents
The most obvious field where monopolies benefit society in a great way is that of patents. Patents give inventors the exclusive rights to market their inventions for twenty years, after which these inventions turn into public property. In other words, patents give these inventors the right to keep a monopoly for twenty years.
Monopolies are so important in this context because if they did not exist, an inventor would probably not receive any financial compensation for his or her work, since the imitators would steal it and flood the market with copied stuff, making the price collapse along with them. As a result, in a world without patents, a lot less people would invest their time, effort and money required to achieve new things.
In order to remedy this situation, the nations all around the world offer inventors monopolies on patents. The result is much quicker innovation; an economic growth much more accelerated and at quicker speeds in the lifestyles. In truth, it is difficult to think about a more beneficial monopoly from the social view of patents.