Defining Competition

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HOT MESS. Look, don't bother reading this. I'm trying to focus on ideas, but keep getting pulled into the big picture. To make this make sense to anyone, I really need to pull it into at least a half dozen ideas.

The idea I want to explore is a question of the "shape of competition". Simultaneously considering the idea of function [what the market does/can do], method [how things happen], and effect [on the customer], what is the difference between "robust competition" and "monopoly". Now, considering those two states as orthogonal poles--meaning one has nothing to do with the other, they are creatures of a different sort--what is the difference between them and duopoly? A triumvirate? Eight players? Twenty? We move beyond the competition/monopoly dichotomy into a richer landscape by asking "where does competition end and oligarchy begin?"

Such an idea implicitly assumes that "competition" is not a boolean state. In other words, there's more to it than whether you simply "have it or not". In other words, I believe that competitive oligarchies are real and there's a significant difference between competition and competitive oligarchy.

To my eyes, the classical business-economic view came from and thus is sensibly focused on "competition or not". In the classical view, there is both a sharp, boolean distinction between "competition" and "monopoly" and a question as to which is the better system. In America, the past 100 years have largely been far more sharply focused on the ideas of "markets" vs "planning". What we forget is that "planning" used to be a very popular idea. For most of human history, in fact, planning was preferred over markets.

This is part of what Hayek means when he talks about the "human impulse to take the family and expand it to the macrocosm"^{[notes 1]} In small groups, it is mete and proper to plan. It would be crazy not to, right? Well, it depends on the scale of things. On an individual, couple, family, level it seems clear that planning ahead is a good idea. In larger scales, it's not so clear.

As far as survival of the species goes, planning is not crucial. It's why we have children when we're young. If all humans died at 25, we'd be able to perpetuate the race just fine. That's we're built to make it to 25. The logic of the individual is very different from the personified logic of the species. Both may achieve survival, though they do it through very different means.

This idea of individual vs. species can also be applied to business vs. market. The individual, like the business, is primarily concerned with it's own survival and satisfaction.

Like the species, the market is more concerned with the quality of the aggregate. Much of what the individual sees as a benefit is, from point of view of species, a hindrance. Individuals might want to live forever, but this would immediately stagnate the gene pool and destroy diversity of the species. Under circumstances of limited resources, infinite longevity means you can have no further offspring. From the perspective of the species, this is the worst thing that can happen.^{[notes 2]}

In a similar vein, the interests and actions of the individual and the market are different. This is the fundamental reason why monopoly is so pernicious. Competition is the method of the market, just as competition is the basis for diversity. Talking "monopoly market" or "monopoly effects on the market" already misses the point. With a monopoly, there is no market.^{[notes 3]}

- Planning is an outgrowth of this understanding.

Notes

1. ↑ Second hand quote from EconTalk discussion. Get book and verify.
2. ↑ This idea considers the biological nature of individual vs. species. The metaphor does not consider and does not apply to culture and societal constructs which have a very different relation to the individual. These domains are all very much different from the individual and all suffer when we lose the distinction, but the nature and mechanisms thereby are different. In other words, one could build a metaphor with each, but it would be a different metaphor.
3. ↑ It's perhaps useful to consider the difference between classic and modern monopolies. The former had far more political influence than the modern brand. Though perhaps still pernicious, it's nothing like it was. Since Antiquity until rather recently, the analogs of modern business only existed as part of the state. Even the guilds of Europe operated largely in conjunction and coordination with the state--both explicitly and implicitly. It's an interesting question as to whether they were monopolies because they wanted to be or whether society didn't know any better or lacked the power and presence to impose the collective will.