The Woman Who Shattered the Myth of the Free Market
When Joan Robinson arrived at Cambridge University in 1929, nobody expected her to become one of the most important economists of the 20th century — let alone the 21st. She had spent the past three of her nearly 26 years in India, where she lived without professional responsibilities while her husband, Austin, an economist six years her senior, tutored a child maharajah. When Austin returned to Britain to join the Cambridge economics faculty, Joan, who had studied the subject as an undergraduate, felt her own ambitions kindled. But she had entered an environment hostile to women.
For 40 years, economics at Cambridge had been dominated by Alfred Marshall, whose intellectual achievements were rivaled only by his misogyny. He’d married Mary Paley, the first woman to lecture in economics at the university, and then promptly destroyed her career, pulling her book out of print. Marshall, a frustrated Robinson noted, treated his wife as a “housekeeper and a secretary.”
But Robinson would avenge her most emphatically. She would go on to devise a new theory that upended Marshall’s intellectual legacy, radically altering our understanding of the relationship between competition and labor power. Now those ideological innovations are shaping the revived debate over antitrust reform.
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Viewed today, Robinson’s arguments appear more like the work of a philosopher than of an economist. In her day, detailed financial statistics — gross domestic product, productivity and the price indexes — would not be finalized for several years. Like other leading economists of her era, Robinson did not reach her conclusions by studying specific industries in detail, but rather by formulating a set of assumptions about business behavior, then subjecting those assumptions to a rigorous mathematical analysis in order to develop a few general rules. In the 1930s, the power of such arguments thus depended on how useful those rules actually proved to be in the real world, and on their intuitive appeal.
The most potent arrow in Robinson’s conceptual quiver was a new idea she called “monopsony.” A monopoly had always been understood to involve a single seller forcing its prices on powerless buyers, like the U.S. oil industry at the turn of the century. But buyers, Robinson observed, could enjoy the forbidden fruits of imperfect competition as well: If only one buyer for a good existed, then that buyer could dictate its price, no matter how many sellers might be competing for its purchases. This was monopsony.
Crucially, Robinson argued that workers, as sellers of their own labor, almost always faced monopsonistic exploitation from employers, the buyers of their labor. This technical point had a political edge: According to Robinson, workers were being chronically underpaid, even by the standards of fairness devised by the high priests of the free market.