The market analogy of democracy played a central role in one of the leading versions of democratic theory in the last fifty years, in the so-called “elite” or “competitive” theory of democracy. In the present paper, I first clarify that the dominant school of the market analogy (Downs and his followers) turned its back on the approach of the originator of the analogy, Joseph Schumpeter. Schumpeter argued that both economic and political competition – due to the activity of entrepreneurs – are necessarily monopolistic and destroy equilibrium. Second, I show how followers of the Schumpeterian market analogy improved upon it by using the concept of natural monopolies and making it conform to the characteristics of politics, while further distancing themselves from Downsian interpretation and the dominant Public Choice approach. Finally, I demonstrate a normative implication of monopolistic competition, namely its consequences for the concept of “agency loss”.