Competition Contd

Competition Contd

Competition (cont�d) It is competition in the third sense which is relevant to political debate on the desirability of a competitive economy. To some the competitive process represents the basis of a liberal society; to others it appears as a ruthless chaos of 'devil take the hindmost'.

Competition provides a means of diffusing power and responsibility throughout the community and of continually widening the area of freedom and opportunity. On the strictly economic plane it provides spurs to efficiency, incentives to seek out and supply the varied wants of consumers, a method of sharing the benefits of technical progress in lower prices and higher incomes, and a means of discovering what, how and for whom to produce.

Competition is no panacea. The freedom it provides may be used to concentrate power, as has been evident since the growth of the large joint-stock companies, trade associations and trade unions. Monopoly power may also result from the superiority of large-scale techniques. Even where the competitive process is unimpeded, it only selects according to the distribution of purchasing power and its results are good or bad only in terms of the prevailing distribution of wealth and income. Social costs, such as the noise, dirt and congestion of urban living, and social benefits, such as the pleasure provided by good architecture, may not always enter into market prices and so may fail to influence the competitive process. Some wants, such as defence and police, are collective in nature, and others, such as some forms of education, medicine, roads and parks, may be most effectively provided collectively. If these wants were left to be satisfied by competition they might be provided inadequately or not at all. Finally, a competitive economy if left unregulated may be subject to booms and slumps. Whilst there is much to be said for a competitive economy, therefore, competition is not sufficient alone to provide a satisfactory social system. It requires a framework of law and institutions on property, contract, business organizations, etc., to direct private effort into channels that ensure public advantage.

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