Neo-Classical Synthesis

...By this term economists mean something very specific, that competitive free markets deliver allocative, productive and dynamic efficiency...

Neo-classical synthesis

After Mill, there was a shift in economic theory, which emphasised a more precise and theorectical moldel of competition. A simple neo-classical model of free markets holds that production and distribution of goods and services in competitive free markets maximizes social welfare. This model assumes that new firms can freely enter markets and compete with existing firms, or to use legal language, there are no barriers to entry.

Neo-classical synthesis.....

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Theory

"Again, trade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interest of other persons, and of society in general; and thus his conduct, in principle, comes within the jurisdiction of society...both the cheapness and the good quality of commodities are most effectually provided for by leaving the producers and sellers perfectly free, under the sole check of equal freedom to the buyers for supplying themselves elsewhere. This is the so-called doctrine of Free Trade, which rests on grounds different from, though equally solid with, the principle of individual liberty asserted in this Essay. Restrictions on trade, or on production for purpose of trade, are indeed restraints; and all restraint, qua restraint, is an evil..."

Theory

Smith also rejected the very existence of, not just dominant and abusive corporations, but corporations at all. By the latter half of the nineteenth century it had become clear that large firms had become a fact of the market economy. John Stuart Mill's approach was laid down in his treatise On Liberty (1859).

Theory

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."

Theory

In The Wealth of Nations (1776) Adam Smith also pointed out the cartel problem, but did not advocate legal measures to combat them.