ABSTRACT
The neo-classical economics that ruled academic establishments from the late nineteenth century to the end of the 1920s refused to consider monopoly or oligopoly as a regular feature of the capitalist economy. What is often considered to be the greatest achievement of the marginalist revolution, that is, the Walrasian theory of general equilibrium, explicitly assumed that all individual economic agents were price takers. Although A.A. Cournot, J. Bertrand and F.Y. Edgeworth built rigorous mathematical models of the behaviour of monopolies and duopolies, they continued to be treated as special cases until the Sraffa-Chamberlin-Robinson revolution put forward the claim that the behaviour of monopolistic, oligopolistic or imperfectly competitive firms should be treated as the norm, and pure competition as a polar case of idealisation. This, however, did not happen for a long time. Perhaps the best proof of that non-acceptance is that John Maynard Keynes, when he formulated his general theory of employment, while breathing the atmosphere of the Sraffa-Robinson revolution in the theory of competition, still assumed that firms were price takers in product markets. Indeed, the ‘neo-classical synthesis’ that ruled the roost as Keynesian economics in post-Second World War academia had the purely competitive behaviour of firms embedded in its foundational structure. (For a short introduction to the varieties of macroeconomics that have evolved since Keynes, see Bagchi, 1994a.)
