Saturday, July 25, 2009

Monopsony

Bill Poser writes in the Language Log:

"It isn't often that I encounter an English word that I don't know other than names of chemical compounds, but I recently learned a new word for something not all that obscure. In a context in which I expected the word monopoly, I encountered monopsony. At first I thought it was a mistake, but it recurred. It turns out that economists distinguish between monopolies and monopsonies. When there is a single source for a product, that is a monopoly, but when there is only a single buyer for a product, that is a monopsony. Who knew?

The classic example of a monopsony is what I have hitherto known as the Chinese salt monopoly. Throughout most of Chinese history, anybody could produce salt, but they had to sell it to the government, which then sold it to consumers. This is why the classic work of Chinese economics, the proceedings of a conference held in 81 BCE with appended commentary, is entitled 塩鉄論 Discourses on Salt and Iron."

By the way, as one LL reader comments, 塩鉄論 is Japanese; the Chinese version is 鹽鐵論 (traditional) or 盐铁论 (simplified).

Another reader comments, "The Chinese 'salt monopoly' was both a monopsony (as purchaser from producers) and a monopoly (as reseller at perhaps abusive markup to consumers), so it makes sense that it would be commonly known in English by the more common word, which is also usually the more salient word (since presumably every household in China needed to buy salt but only a tiny percentage of the population would have been in a position to sell it). I am not an economist and managed to get through four years of college without a single economics class, but I've known the word since I don't know when; I assume I probably picked it up in the context of antitrust law, where the lawyers and judges had borrowed it from the economists."

And another: "On NPR's Planet Money not too long ago, there was a story on the economics of piracy, which explained the monopolist-monopsononist relationship, that is, there is only one seller (the pirate), and only one buyer (the ship's owner), and yet they still have to agree on the 'market' price. Well worth a listen!"

And a third reader: "I learnt this word from a student's essay I was marking a few months ago. I then used it with confidence in the next week's class. Ah, the legerdemain of academe."