The Competition Fallacy

MSS engineer Jon Goff has recently started his own personal blog, Selenian Boondocks. He concentrates on space exploration with a libertarian worldview, and he knows space transport systems. Of course I point this out because he provides an excellent "teaching opportunity". In his post on NASA Administrator Mike Griffin, Jon quotes Griffin:

The grounding principle of US economic growth has been competition...So, for me, as NASA Administrator, the problem is how do we engage that engine of competition more productively so that it can work on behalf of the space business?

And Jon says one of the most important truths of free markets and how the U.S. has come to be economically dominant:

... I would quibble that it is private property, the right to free-association, and their offspring, entrepreneurism, that are the grounding principles of US economic growth...

Now for the great teaching opportunity:

...competition is also an important part of all that.

Well, no it isn't. You see competition is not anything unique to any one economic system, rather it is one of the fundemental properties of all economic systems, whether socialism, facism, mixed-economies, state-capitalism, or free markets.

The typical definition of economics is something along the lines of "the study of the allocation of scarce resources". Note that there is an "allocation" of something that is "scarce". "Scarce" means that there isn't enough to go around to everyone who has some use for it. More specifically, when the price of the resource is zero, then demand will exceed supply. Now, no matter what the economic system in use, somehow those resources need to be allocated. Competition for the allocation of those scarce resources must exist. The competition can take the form of political ass-kissing, getting to the front of the line, trading greater quantities and/or quality of goods, incapacitating/killing others, or something else.

The notion that "competition" is a feature or bug of capitalism is a fallacy. It is a fact of life, no matter what the economic system.

Share this

Would it make a difference

Would it make a difference if he had said open competition, or fair competition, or meaningful competition, or something else? Is there some modifier for which you would consider his statement about competition and capitalism to be true, or do you think the type of competition that occurs under capitalism is simply not unique in any salient way?

Open, fair, or meaningful

Open, fair, or meaningful can apply as modifiers to any of the examples of competition I mentioned. So no, adding those words will not make a difference. The particular economic system will encourage particular types of competition - free markets tend to promote the more and better goods in trade, while facism and socialism encourage political ass-kissing. Mixed economies produce some mixture of political ass-kissing and better goods/services. Without adequate legal institutions all will degrade to the killing and maiming competition.

I think the only uniqueness to free market competition is that suppliers tend to compete on the basis of providing more and better to the consumers, whereas in other systems competition tends to be between consumers vying for the supplier's or government's favors. Note this isn't an absolute, I can think of exceptions to the above, but I think it is a fair generalization.

AA, Yes, the style or type

AA,

Yes, the style or type of competition tends to be different in market economies, but competition still exists in the command economies - who gets the better quality cuts of meat? who gets any meat at all? The fitness function exists no matter what, it is just more efficient and less deadly in the free market.

I think you miss the point.

I think you miss the point. Competition has a function in market economies and ecologies that is missing in command and control economies.
In a market economy, people cooperate by competing. This, the austrians say, drives innovation and efficiencies. Under democratic socialism, on the other hand, competition is a war of all against all, nasty brutish and short. In a command and control economy, you might have a department of shoe production, which makes all the shoes. Anyone making their own shoes could get shot. Or there could be a regime of national shoe insurance, in which when you need shoes you submit a request to your shoe insurer, which puts you on a waiting list...
The function of competition in a market economy is similar to natural selection in ecologies. Each develops systems that contextually manage information, as the universe gradually becomes more self-aware. And then as the singularity approaches, it's less gradual. Without competition in markets and ecologies, the process of the universe becoming more self-aware gets disrupted. Perhaps some form of scientific socialism creates some advances in the self-awareness of the material universe, but it is at least a lot slower - and lacking in competitive fitness - than a market.

I certainly agree with some

I certainly agree with some of the others, that his definition of "competition" more than likely meant "free, cooperative competition." To call politicking, cronyism, and ass-kissing a sort of "competition," is valid, but so is the "competition" of me trying to beat you to a bloody pulp in order to steal your watch & wallet. Certainly he was referring to competition of the former, where personal rights remain inviolate.

Note also that he didn't say competition was an exclusive trait of capitalism, he only said that it is an important part thereof. That competition, in one semantic sense or another, is also important in other economic structures is not implied or otherwise argued in the quotes provided.

Dave, I agree with your

Dave,

I agree with your point that you make, but it is kind of tangential to
the main point of my article. More importantly, I *was* as you showed,
trying to emphasize that the most important parts of the US economic
system were free association, entrepreneurism, private property, the
right to contract, etc. But it's ok, I'll take any links to my blog
that I can get. :-)

~Jon