Economists’ understanding of competition – Editor

The following extract is from an article by Dr Evan Jones which appeared in The Bulletin more than twenty years ago, entitled Down with Economists. We reproduce it now as a matter of interest, and because we don’t believe anything much has changed, since that article was written, in the mainstream economists’ understanding of the market mechanism.

“[amongst economists .. ] competition itself is poorly understood. Two dominant versions exist. The first version depends on large numbers of small firms inhibiting the accession of any to a position of market dominance. This is the stuff of the textbooks. Version two depends on all firms of whatever size and product fighting it out to the death (Social Darwinism). Its second version has much currency in right-wing think tanks.

“The first version requires strong regulatory action for its success. The second insists that regulatory action is what inhibits the system from working. Public representations to the electorate of the advantages of competition mix these versions unashamedly. Both can’t be right. The details matter as to what a Trade Practices Commission might do or whether we have a Trade Practices Commission at all. ”

Dr Evan Jones is a research economist attached to the University of Sydney, Dept. of Political Economy, and is an ERA patron.