Cartels

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In his book, Milton Friedman describes how the AMA is the “strongest trade union in the United States” and he documents the different ways in which the AMA restricts competition. The AMA approves both medical schools and hospitals. By restricting the number of “approved” schools and therefore, the number of potential candidates for those schools, the AMA is actually limiting the number of physicians. This is essentially the same thing OPEC did with the price of oil during the 1970s. The AMA has then increased their fees by restricting the number of physicians in the market (Perry). The American Bar Association acts in a very similar way as the AMA by creating massive barriers on who can become a law professional and thus they are restricting the supply of legal professionals, which drives up the salaries of lawyers across the country.

College accreditation agencies also act in a similar manner. These agencies determine which schools qualify to be accredited for specific programs, thus forcing certain programs and schools to be considered “inferior” to others. This forces a restriction on the number of institutions a student can attend to partake in the special benefits that accredited universities offer. Some of these benefits include greater access to federal loans, and scholarships. A lot of graduate programs also force students to have earned their undergraduate degree from an accredited institution.

The way to stop cartels is to increase the supply of the good or service being artificially inflated by the cartel. Pure competition would be the best market structure to do this as the goods are considered homogeneous, and ideally there would be low barriers to entry. If more sellers were introduced to the market, it would force the cartel to comply with the new price in the market which would ultimately lead to the cartel disbanding.

References

- Johnson, Paul M. "A Glossary of Political Economy Terms." Cartel: A Glossary of Political Economy Terms. University of Auburn, n.d. Web. 13 Feb. 2017.

- Baird, Charles W. "Labor Cartels, Competition, and Government." FEE Freeman Article. Foundation for Economic Education, 01 Aug. 1994. Web. 13 Feb. 2017.

- Sherk, James. "What Unions Do: How Labor Unions Affect Jobs and the Economy." The Heritage Foundation. N.p., 21 May 2009. Web. 13 Feb. 2017.

- Worstall, Tim. "Now OPEC Faces The Problem Of All Economic Cartels: Enforcement."Forbes. Forbes Magazine, 01 Dec. 2016. Web. 13 Feb. 2017.

- Pagels, Jim. "One Intriguing Way The NCAA Cartel Could Crumble And Pave The Way To Paid Athletes." Forbes. Forbes Magazine, 29 Jan. 2017. Web. 13 Feb. 2017.

- Perry, Mark. "The Medical Cartel: Why Are MD Salaries So High?" Wall Street Pit. N.p., 24 June 2009. Web. 13 Feb. 2017.