What is the price of monopoly?

Yesterday there were protests again against high electricity prices. Those who took to the streets are not satisfied with the level of the price they have to pay for electricity consumption, and this makes sense and is understandable to some extent. Every consumer wants to pay as low a price as possible for the goods they consume.

Paying a lower price for one good means more income is available to buy other goods. The lower the prices of goods and services, the more real income everyone has. Ultimately, it is the resources we can acquire with our income that matter, not the income itself.

But prices also play a role in a person's economic activity. They are not some nominal value that has no connection with reality. On the contrary, prices reflect human preferences and the relative scarcity of resources. Since resources are limited (in insufficient quantity compared to needs), prices represent a relationship between the different degrees of scarcity of different resources relative to people's preferences. Price as a relationship is what it is, and it reflects essential aspects of reality. A protest directed simply at a "high" price pleads for some supreme knowledge about what reality should be. In such a case, it is meaningless, because it cannot rationally answer the question - What level of electricity price is admissibly "high"?

Ultimately, the price of any good and service that a consumer wants to consume matters only when it is related to his income. Each consumer relates the price of different goods and services to the level of his income, while at the same time wishing to pay the lowest possible price. Does this mean that a protest against the relative price of electricity, i.e. the price of electricity related to the consumer's income, is a meaningful protest? No, because each consumer has a different income and, above all, because each consumer would declare that he wants the maximum price of electricity to be zero. Accordingly, such a protest cannot give an objective and consistent with the limitation of the resource electricity answer to the question - What is the "correct" level of the price of electricity relative to the consumer's income level?

Then, if a protest against the price of electricity as an absolute quantity and the price of electricity relative to the consumer's income are meaningless, which protest is meaningful? This would be a protest against reasons that artificially make resources relatively more limited. One such reason is the exclusive privilege to provide a product granted by the state, also known as a monopoly. This privilege increases the scarcity of resources (which leads to higher prices) and reduces the real income of consumers. It seems that the protesters have focused on the monopoly in the energy sector in Bulgaria. But unfortunately, they are not attacking the monopoly itself, but the (almost) irrelevant detail that currently private owners have exclusive privileges.

Economic theory teaches us that competition, i.e. open entry into the supply of a given good, tends to lead to a lower price and higher quality of the good in question. Then a protest against the price of electricity offered in a monopoly environment is economically justified, because its price is most likely above the level it would have in a competitive market. Protesters should focus on this detail and not be distracted by things like pricing in the supply of electricity (we do not care what the costs of the bread producer or the milk producer are, but we know that competition exerts downward pressure on the price of their products), or who the monopolist is (the state or someone close to the state).

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