Minneapolis Fed economist James Schmitz Jr. has published research that challenges how modern economics defines monopoly—and if he's right, we've been looking at market power in all the wrong places.

The textbook definition focuses on firms with pricing power: companies that can raise prices without losing customers. But Schmitz argues this misses the real harm. In his view, monopoly should encompass "effective organized functional groups" that engage in anti-competitive conduct—not merely firms that control prices. The distinction matters because it shifts attention from market concentration to monopolistic behavior.

Here's what that means in practice. Under the traditional definition, regulators scrutinize large companies in concentrated industries—tech platforms, pharmaceutical manufacturers, telecommunications. But Schmitz's research points to industries that have escaped scrutiny precisely because they don't fit the textbook model: residential construction, hearing aids, legal services, dentistry, and yes, even professional economists.

Take housing. The U.S. doesn't have a single dominant homebuilder, yet factory-built housing—which could dramatically lower costs—remains a negligible share of the market. Why? According to Schmitz, it's because the residential construction industry has successfully blocked technological innovation through building codes, zoning regulations, and trade union opposition. That's monopolistic conduct without monopolistic market structure.

Or consider hearing aids. The American Speech-Language-Hearing Association and audiologists have fought lower-cost alternatives for decades, even as the underlying technology became commoditized. There's no single hearing aid monopolist, but the professional group acts collectively to maintain prices and restrict competition. The result: Americans pay thousands of dollars for devices with manufacturing costs in the hundreds.

The legal profession offers another example. The American Bar Association has successfully restricted paralegals and legal software from performing routine legal work, preserving high-margin services for licensed attorneys. The result is legal fees that put basic services—contract review, estate planning, small business formation—out of reach for most Americans.

Schmitz's framework has significant policy implications. Modern antitrust analysis focuses on "deadweight loss"—the efficiency cost of higher prices. But he argues economists have underestimated monopoly's broader harms: stunted innovation, rent-seeking, and distributional effects that fall hardest on low-income populations who can't afford overpriced housing, healthcare, or legal services.