The Economics Profession Came to Embrace the Theory of Natural Monopoly after the 1920s When It Adopted the Engineering Theory of Competition

The economics profession came to embrace the theory of natural monopoly after the 1920s, when it became infatuated with "scientism" and adopted a more or less engineering theory of competition that categorized industries in terms of constant, decreasing, and increasing returns to scale (declining average total costs). According to this way of thinking, engineering relationships determined market structure and, consequently, competitiveness. The meaning of competition was no longer viewed as a behavioral phenomenon, but an engineering relationship. With the exception of such economists as Joseph Schumpeter, Ludwig von Mises, Friedrich Hayek, and other members of the Austrian School, the ongoing process of competitive rivalry and entrepreneurship was largely ignored.

--Thomas J. DiLorenzo, "The Myth of Natural Monopoly," Review of Austrian Economics 9, no. 2 (1996): 46.