Platonic Competition
The doctrine of "pure and perfect competition," writes George Reisman, is a central element both in contemporary economic theory and in the practice of the Anti-Trust Division of the Department of Justice. It is totally unlike anything one normally means by the term "competition." Indeed, the existence of rivalry, of competition as it is normally understood, is incompatible with "pure and perfect competition." Economists know that their doctrine is inapplicable to reality. This does not trouble them. [FULL ARTICLE]





Comments (33)
Curt Howland
I like that term, "tribal" theory of property. It nicely illustrates the backward aspect of "eminent domain".
Published: December 20, 2005 8:14 AM
Michael A Clem
Nice rebuttal of "pure and perfect competition", but I didn't get the sense of how real competition in the real world is better and more efficient, merely that it wasn't "pure and perfect".
Published: December 20, 2005 9:20 AM
Roger M
Michael,
Real competition is better because it is real, not imaginary. Reisman describes the many ridiculous conclusions if one tries to be consistant with pure and perfect competition (PPC). For example, how can consumers have perfect information about prices and products withouth advertising? It's impossible. If I introduced a new product, such as a personal computer, and couldn't advertise, I'd go broke because no one would know about it. That's why real competition is more efficient that PPC.
Published: December 20, 2005 12:46 PM
Peter Bach
When will Dr. Reisman's masterful ideas find their way into textbooks of economics? Only when someone steps forward to write such a textbook!
Published: December 20, 2005 3:50 PM
Jim Bradley
Peter -- In case you are unaware: Reisman wrote his own textbook (www.capitalism.net).
Libertarianism suffers from the same deficit as this article notes with respect to perfect competition: libertarianism is an exercise in "definitional fantasy", i.e. define away "sin" and say all the "bad stuff" is from "governments". Okay. Now what? Relabeling the problem is worse than useless: we spend time playing in our fictional sandbox. Hey, define all you want, I'll keep my guns, thanks.
Arguing the "axiom" of "self ownership" and "homesteading" on anything but commonly understood sense of justice will fail. It's not clear or even axiomatic that everyone is a self-owner, despite Hoppe's attempt at saying self-ownership is a prerequisite for argument. Does that mean that people that don't argue, or those that are submitting slaves are not rightful self-owners? Does that mean that if domination is so complete that the thoughts align themselves with the new dictatorship that those rights are lost?
The right to one's labor and property is a moral question which is settled on our sense of (perhaps God-given) justice. The universal morality isn't "self-ownership" but the golden rule. Property rights are the practical attempt at applying the golden rule in a world of scarcity -- and additionally, the balance of power is an attempt to deal with the corruption of men.
The world would be better without initiating force, but it would also be better if ice cream were nutritious and one wouldn't get fat eating it. But it's useless to define away "fat" out of the reality .... If only reality were like this, and only reality were like that ... Some of the libertarian arguments, when seen from that perspective, are just nonsense.
Published: December 20, 2005 4:18 PM
Alex MacMillan
I have always found perfect competition a useful starting point in explaining why the real world doesn't operate that way (for all the reasons noted by George Reisman). In other words, here are the assumptions necessary for this fairy-land model of perfect competiton. Then, by examining each assumption, we can see why the real world of business doesn't conform to that model, but, instead, how it in fact does work. The textbooks quoted are quite dated. Are there really academic economists today who believe that in a dynamic world, the so-called perfect competition model is achievable, or if it was, that it would be ideal?
Published: December 20, 2005 5:12 PM
N. Joseph Potts
My daughter just completed a Principles course at George Washington University that included discussion and MEASUREMENT of the "social loss" to monopoly in hypothetical conditions.
The timing is perfect (she got an "A" from a notoriously tough professor), so I sent her this to keep her economics warm over the Christmas break. I don't see how a thoughtful young person exploring economics could resist an explanation like this. Or old person, for that matter.
Published: December 20, 2005 5:46 PM
Alex Davidson
Jim
As usual, you miss the point. The article was attempting to show that the foundation of much actual practice in setting the (government) policies that we all live under is a fairy-tale that does not withstand rational analysis. In contrast, capitalism (and libertarian thought) is based upon logic, reason, and truth, and I have yet to read any critique of it that is not based on emotion, blind belief, or non-sequiturs.
Your key criticism is that libertarianism is impractical or impossible. A society where no-one steals or cheats also has these characteristics, but that doesn’t stop intelligent people advocating it, nor should it.
Libertarianism should be viewed as a goal – a state of affairs which we aspire to, but which seems hard to achieve from where we are now. That is not nonsense. On the other hand, giving up, and deriding the goal as impractical, is a sure-fire way of ensuring it will never be reached. All great achievements start as a dream, often viewed as impossible until they are close to success.
And in regard to justice: surely consent is the very foundation of justice – therefore how can justice exist without self-ownership, including one’s consensually-acquired property?
There’s certainly nothing just about defining the right to one's labor and property as a moral question. Who gets to define the morality? Me or you?
If it's me, then I'm going to say that it's all about self-ownership, and I'm not going to coerce you in any way. If it's you, though, it would seem that you are going to make my decision for me, and decide who benefits from my labor and property according to your morality, without my consent. Hardly just.
Published: December 20, 2005 8:01 PM
Fried Egg
Jim,
You said:
'Libertarianism suffers from the same deficit as this article notes with respect to perfect competition: libertarianism is an exercise in "definitional fantasy", i.e. define away "sin" and say all the "bad stuff" is from "governments". '
However, I think your analogy is flawed for the following reason. This article does more than make the case that the notion of "pure and perfect competition" is idealistic and unattainable in practice. It states that it would actually be undesireable. We would be worse off even if we did somehow achieve it. It is the kind of real life competition (that the "perfect" compeition doctrine despises) that has driven real progress.
Published: December 21, 2005 3:57 AM
James
Jim,
Hoppe's argument has been maligned because some misunderstandings of it are real howlers. If Hoppe ever claimed that e.g. no slave has ever argued, that would be just cause for ridicule but Hoppe has never argued any such thing. His argument is (to paraphrase):
Any ethic worth adhering to must be defensible via argumentation. Arguing presupposes "I am morally entitled to argue," which presupposes "I am morally entitled to control the scarce resources that constitute this body," i.e. self ownership. Of course a person could disagree and argue that someone else should own him or something similar. Hoppe never denied that this was physically possible, only that it is impossible to do without holding an inconsistent set of normative assumptions.
Re: libertarianism, I'd love to respond to your criticism but I can't tell what it is. You write
Since this is not a view that any serious libertarian has ever expressed, by principle of charity I have to assume that you don't really mean to say that libertarians claim everything bad comes from governments. Perhaps it's a quantifier mix up? What libertarians do believe is that from all governments come bad things, most of which are sinful, many of which are avoidable if the state had less power.You also write,
Are you familiar with the term non sequitur?Published: December 21, 2005 4:53 AM
Jim Bradley
Alex -- nonsense -- libertarian arguments are as frequently based on emotion as much as the non-arguments, the method is just different. Libertarians have this habit of constructing "logical universes" that are self-consistent but don't necessarily fit the real world -- and they do so based on emotional drives.
The key criticism is libertarianism avoids the problem, i.e. HOW to achieve a just society. Umpteen volumes of this is wrong and that is wrong tend to avoid the vast disagreement and the tradeoffs (i.e. the real practical hard stuff) inherent in any system of justice.
In fact, the evasion goes so far as to assert that there can be a situation with no final authority: no state at all. Now perhaps that is right, but the argument is weak: after all there has to be some deciding factor that can enforce contracts in disputes, and the tendency toward a centralization of power (whether it be from new violence or economic power) is also likely to lead back to a state. If the majority isn't willing to constrain the state now, they will be unwilling in the future.
Of course consent is the foundation of justice, but does that rest on "self-ownership" or does self ownership derive from consent and thus our sense of justice is a superior argument. I believe you miss the point.
Fried -- That is a difference, however the criticism of libertarianism survives the difference. Both groups: libertarian and "perfect competition" adherents both believe that their world will be better as it avoids the centralization of power. There is no real constraint on a large organization from "becoming a state" or "joining hands with the state" except the threat of violence by the majority. And if the majority will not do this now, it will not do this in the future. Hence the libertarian model fails.
James: "bad stuff" = initiation of force. You make a straw man counterargument.
The ice cream argument is an argument by analogy, not the form of argument subject to an unsupported criticism of non sequitur. You would need to identify the essential characteristic where the analogy fails to hold. At issue is whether or not libertarianism is a created and unreal universe. If it is, the analogy holds, if not, the analogy does not hold.
A person arguing that they are morally entitled to not only their body, but also the body of someone else can't argue for lack of consistency? Why not?
And I am reasonably sure people of that type are not disposed to engage in debate anyway: the only way the argument will trump the existence of a gun is if the majority believes the argument and that argument coincides with their sense of justice, not their sense of "self-ownership" which is inferior and derived from principles of justice.
And if the majority is the controlling factor, libertarians will have to rely on a governmental system that protects the rights of people through the majority yet still protects the rights of individuals.
Why, heavens be! We have that now! And if it fails now for reasons that the new libertarian society cannot and thus will not eliminate certainly going any farther than this is fiction and an exercise in fantasy ...
The practical implementation is the CONSTRAINT, not the "vision", hence the criticism is valid.
Published: December 21, 2005 7:13 AM
Fried Egg
Jim,
You said:
'There is no real constraint on a large organization from "becoming a state" or "joining hands with the state" except the threat of violence by the majority. And if the majority will not do this now, it will not do this in the future. Hence the libertarian model fails.'
Anything the majority will not do now, they will not do in the future? Anything bar the status quo fails in that case. If that is true, we might as well all give up envisaging a better future and just resign ourselves to what is.
Of course, the fact that we do not, means that we do not agree with this reasoning. The majority does not accept the libertarian argument now, and therefore it fails now. But it may do in the future, and hence libertarianism may succeed in the future.
Published: December 21, 2005 8:10 AM
David White
Jim Bradley,
The fact that there are forces at work today that, with no planning whatever, are triumphing over the state (http://www.lewrockwell.com/orig/garris3.html) means nothing to you for one reason and one reason alone: you have no faith in freedom and thus no faith in mankind. Why? Because you believe man's nature is such that he is incapable of living in freedom and must instead be lorded over by someone else, never mind that someone else is always man -- at least until the REAL lord takes over.
Thus are you an apologist for the status quo, and thus are you an apologist for evil.
Published: December 21, 2005 8:31 AM
Jim Bradley
Fried - But of course I don't make that argument ... you make it. I note defects in the libertarian theory and you take that to mean something else entirely.
David White - What nonsense you argue: "faith in mankind" or "faith in freedom" without which (and the chain of logic grows even more tenuous that such faith has been shown to have anything whatsoever to do with the issue) a person makes an argument for the status quo and is an apologist for evil (and therefore either incapable or mistaken or evil themselves)?
If you wish to answer the objection that "if it fails now for reasons that the new libertarian society cannot and thus will not eliminate certainly going any farther than this is fiction and an exercise in fantasy" then go ahead.
Libertarianism does not address the core problems of restraining the growth of power any better than the "balance of power in limited government" because both systems share a problematic reliance on the majority for the restraint of violent organizations and people and to enforce contracts, yet neither system can afford to commit power to a more focused minority. Theorists have yet to explain (except for valiant attempts by Hoppe) how such a system could work, and what final authority will be in place to settle conflicts, and if that can be done, then there's a practical question of how to get there as well.
The difficult questions of implementation are what counts.
Published: December 21, 2005 12:31 PM
Michael A Clem
Part of the point of AC, I think, is that there is no final authority. Think of how common law worked, for example.
In any case, you seem to be either proposing some kind of benevolent dictatorship, or simply the futility of solving the problem of power. Sure, the details matter, but only once the larger and more general goal has been decided upon. Philosophy and action are complementary to each other, not mutually exclusive.
Published: December 21, 2005 12:55 PM
Allen Dalton
I am amazed that Mises blog would run this. A careful reading shows that Reisman not only misunderstands the notion of cost but that his view is itself an open attack on the Austrian view of cost and choice. With friends like this, who needs enemies?
Published: December 21, 2005 3:11 PM
David White
Jim Bradley,
Aside from the fact that most of what you write in your last post is gibberish, any libertarian worthy of the name knows that the state is inherently evil. Thus anyone who "makes an argument for the status [i.e., statist] quo" is an apologist for evil.
Furthermore, that you do so because you have faith neither in mankind nor in freedom is PRECISELY the issue, for the simple reason that this is the mentality of every statist the world over. They/you believe that man is incapable of self-governance and that he must therefore be governed by others, who are nonthelesss men.
But as Hitler said, "What luck for rulers that men do not think." Indeed, what luck for rulers that men like Jim Bradley think on their behalf.
Published: December 21, 2005 3:31 PM
Jim Bradley
Michael -- What matters IS the implementation, not the "vision". Social interaction stops being voluntary as soon as someone brings a gun to the party. So what is the answer to that eventuality? What is the answer to contract violations?
David White -- But you confuse libertarian shorthand with the issue: the state is an institution made of men and thus it is not inherently evil apart from the men that make it up. You make my case despite protestations and attempts to divert the issue. I have faith that some men will attempt to dominate others by violence and therefore it is necessary for self-defense to occur. I also am quite sure that violence is the ultimate decider of property rights whether it be just or unjust.
What type of authority will decide, David? Each person for himself (and thus the weak have no power of self-defense which offends our sense of justice), or some other system?
Published: December 21, 2005 3:59 PM
Paul Edwards
Allen Dalton:
Your comments interest me so i wondered if you would be willing to cite a line or paragraph from the article and elaborate a bit on your reaction to it more specifically.
Published: December 21, 2005 6:02 PM
Alex Davidson
Jim,
I’m sorry, but when I read your responses, I get the feeling that you don’t fully comprehend the lines of reasoning put forward by those advocating liberty.
Your statement that consent precedes self-ownership, which you make without supporting argument, flies in the face of observation and reality. Unless you believe in supernatural forces, self-ownership is an obvious fact, displayed through action by every human from the day they are born. It is clearly more fundamental than consent, which most of us only start experiencing when we become adults.
I don’t believe that libertarianism avoids the problem of how to achieve a just society at all. Many individuals and several organisations (e.g. Mises) recognise that the way forward is through education. Yes, there is a lot of hard stuff, and while that is a major challenge, it doesn’t undermine the arguments for liberty.
You expand on this by speculating that the deciding factor in disputes must inevitably be a single powerful group. That is precisely what is wrong with our current systems – the single deciding factor is a group, rather than a set of just and self-consistent principles. Central to these principles would be the concepts of self-ownership and consent. They would be enforced not by a government which operates according to who has the most political influence or largest mob backing them, but by many groups or even individuals who operated in a market for such services. Doubtless there would be unforeseen problems, but I don’t think we should abandon our efforts to reach the end result just because we might not be able to see how to get there from where we are now.
I note that you didn’t address the final point I made – the injustice of imposing your morality on others. How do you justify this? Is it simply faith, or do you have a logical and reasoned basis for it?
Published: December 21, 2005 6:20 PM
David White
Alex Dalton,
As a hardcore religious fundamentalist (I know this from previous email exchanges), Jim Bradley justifies his morality through faith alone, reason being subservient to the "supernatural forces" that are paramount in a belief system that has no use for freedom other than that which is allowed to choose between outcomes that, by definition, were predetermined by the supernatural force to whom he and his ilk (e.g., George Bush) have sworn allegiance.
That's why the thought that mankind can prevail against the state is anathema to him. HIs eschatology disallows it.
Published: December 21, 2005 7:46 PM
Allen Dalton
Paul:
Reisman writes: "Similarly, a cost, according to contemporary economics, is not an outlay of money made by a buyer to obtain goods or services through free exchange, but the value of the most important alternative goods or services "society" must forego by virtue of obtaining any particular good or service."
For Austrians, both value and cost are necessarily subjective. Cost is the value of the best alternative foregone. By defining cost as a money outlay, Reisman rejects the Austrian view. Mainstream economics accepts this fundamental observation, though often forgets it in application. For Reisman to use the word "society" simply misstates both the Austrian and mainstream view. The quote from Ferguson that follows, having been set-up by a misunderstanding then appears to support his (Reisman's) position. But as his original understanding is wrong, so is the conclusion he draws from the erroneous premise.
I could go on. He misunderstands or purposely misstates the notion of sunk cost. His theater example is a tissue of fallacy because he has misunderstood or purposely misstated the notion of cost that applies in choice.
Published: December 21, 2005 9:26 PM
James
J. Bradley,
You ask, "A person arguing that they are morally entitled to not only their body, but also the body of someone else can't argue for lack of consistency? Why not?"
Because argumentation presupposes the universality of truths, including moral truths, and such a position is not universalizable. Rather it is an example of the form of moral relativism called particularism.
Re: "bad stuff" = initiation of force, say what you mean the first time. By changing your tune, especially repeatedly, you run the risk of thinking your arguments brilliant when in fact others have simply decided it takes too much time to try and communicate with you.
No libertarian claims that all initiation of force comes from the state, only that (1) from all states comes initiation of force. Libertarians also believe that (2) the initiation of force is unjust. From (1) and (2), we conclude that all states is unjust. This argument takes the valid form of a hypothetical syllogism. Since the argument is deductively valid, the only counterargument would be to show that one of the premises is false. Because you attempt to argue against the conclusion with references to icecream that have no implications for the truth of (1) or (2), the charge of nonsequitur sticks.
Re: final authority, no state can consistently provide this either. This is a problem common to both anarchy and the state, and is therefore not a reasons to prefer one or the other.
Published: December 22, 2005 12:45 AM
Peter Matias
Was Ludwig von Mises a Libertarian?
Published: December 22, 2005 6:30 AM
Jim Bradley
Alex -- libertarianism avoids the problem by refusing (in the majority of works) to posit the practical implementation of (or spontaneous structure solving the problems of) such a society.
James -- The libertarian argument rests on the "universality of moral rights" not of "truth in general" (such as the law of gravity). There is no such defense for universality of moral rights except our common sense of justice and empathy for the underdog. There is NO LAW in the universe that says you must or will be treated a certain way as there is a law of gravity which so far as we can tell is inviolable. The argument artificially applys a physical law argument to a moral law argument. That all men have certain rights and that they are equal is not derivable from any sort of apriori logical argument whatsoever.
Rights are the derivative of our God-given sense of just action. In fact the whole theory is inconsistent: If I possess "self-ownership" can I therefore choose to sell it by committing myself to contractual labor? If yes then it is not axiomatic, if no then labor contracts violate rights. The claim is it is impossible to disclaim that right as it is axiomatic.
The syllogism you present is not even on the radar of discussion. I claim that libertarians systematically do one of the following (a) ignore the problems that arise without a state or final monopoly of violence or (b) do not describe the resulting structure and how it would logically function or (c) if they go so far as to do A and B they end up where we already are: limited government, hence libertarians (in general) do exactly "define all the bad-stuff to be states" and propose nothing new as shown in the following.
The "define states as all the bad stuff" goes so far by some authors as to call anarchy in Somalia (roving bands of thugs) various competing "governments". That is consistent with the view that within a certain boundary (city, town, whatever) there is exercised a monopoly on violence and states struggle for monopoly. There are clearly "states" of different sizes. By why not take that all the way down to the individual level? Isn't a violent abusive person a "state" in their own household? So isn't THAT defining all "evil" to be states?
The entire libertarian "axiomatic" theory simply falls down -- after all in Hoppe's attempt at spontaneous order we see that it is likely smaller enforceable covenants (or "states") would arise by voluntary agreement. So the argument is really smaller states are better. Okay. Then what's the fantastic new viewpoint?
David White -- Nice way to engage in dicussion, David: attempt to badmouth one side without offering your own opinions. I'll speak for myself thanks. You are free to speak your own mind, but not mine. I note you make grotesque errors in philosophy. That should become clear if you define supernatural and define faith.
Peter -- Not an anarcho libertarian.
Published: December 22, 2005 7:40 AM
James
Jim Bradley,
I can't address every logical error or misrepresentation of libertarianism that you have made in your last post, and in fact my impression is that your dislike for libertarianism renders useless any attempt to reason with you. I'll simply quote two of your own remarks in hopes that you may be moved to reconsider your methodological nepotism.
"The libertarian argument rests on..."
"I claim that libertarians..."
And only a few lines later,
"You are free to speak your own mind, but not mine."
Published: December 22, 2005 11:54 PM
Peter Matias
Jim Bradley,
Then what kind of Libertarian was he? (L. von Mises)
Published: December 23, 2005 5:10 AM
Peter
Mises is usually called a minarchist, since he claimed to believe that government was necessary to provide security. But he also wrote that secession down to the level of individuals would be a good thing, and that is precisely the anarchist position. So Mises was an anarchist, he just apparently didn't believe anarchy would work in practice.
Published: December 23, 2005 6:20 AM
Jim Bradley
Peter -- Mises disclaimed praxeology could be held to decide questions of morality in the intro to Human Action, but instead could correctly predict the results of such action. Anarcho libertarians usually (but not all) argue that morality is derivable from an axiomatic base, in contrast to Lysander Spooner who did not do such a thing (see his arguments here: http://www.lysanderspooner.org/bib_new.htm). Incidentally, Spooner's arguments for liberty are fantastic and they are very much against the position of many of the people that post here... even though Spooner is held in high regard.
James -- Gotta say I'm disappointed. If I'm wrong, then I'm wrong, so be it, but I should hope I will not act as if "methodological nepotism" - which is simply saying that one argues from a point of view which is to say ... nothing important at all - should be held in contempt, while the charge of "dislike for libertarianism" is a red-herring an in fact false. I like liberty, freedom, and libertarianism very much, thank you - which is why I am apalled at (what I see) are errors of fact, logic, and practical application coupled with the lack (in some cases) of the defense of justice (such as Rothbard's insistence that caring for one's children cannot be the subject of legitimate state action). Anyone can create a universe in their mind, it's a lot harder to live in this one ...
Published: December 23, 2005 10:28 AM
Jim Bradley
Alex -- Rereading your post: "self-ownership is an obvious fact, displayed through action by every human from the day they are born." Besides the impossibility of defining self-ownership, you assert babies and children are self-owners? By what theory?
"Central to these principles would be the concepts of self-ownership and consent. They would be enforced not by a government which operates according to who has the most political influence or largest mob backing them, but by many groups or even individuals who operated in a market for such services" ...
A "market" in violence that remains committed to justice? I believe those terms are as contradictory as a "limited government". Thus libertarianism offers little really new.
The so-called injustice of imposing morality on others -- certainly we impose the prohibition of wanton destruction and killing and do so by all force: that is hardly injustice. A concept of justice is born into every man except the insane.
Published: December 23, 2005 12:14 PM
Peter
Jim: argument from authority has very little meaning for me. I don't care what Mises believed, or what Spooner believed, except as an interesting insight into them as people. So Mises thought praxeology couldn't derive morality, and Spooner didn't try -- so what? Hoppe has shown that Mises was wrong on this point. Mises never claimed to be infallible.
Published: December 23, 2005 7:56 PM
anarkhos
"The so-called injustice of imposing morality on others -- certainly we impose the prohibition of wanton destruction and killing and do so by all force: that is hardly injustice. A concept of justice is born into every man except the insane."
Wanton destruction and killing of property which is owned my people and people who own themselves. People who can make claims and speak for themselves.
The criminal acts are specific in nature, not general "wanton destruction and killing". If they aren't very specific in nature, how does one know which course of action is illegitimate?
Let's not play games here. You're referring to abortion which, as Rothbard correctly points out, isn't any of your business.
Once you realize it isn't any of your business, so goes the rationale for a state to meddle in the business of others.
Published: December 24, 2005 10:06 PM
David White
Jim Bradley,
Yes, the state is an institution made up of men, but this does not ipso facto make it evil; rather, it is what these men (and women) do in the creation and maintenance of the state that is evil, all the more so in that the state is now deemed not only necessary but good. And while this is precisely how "some men...dominate others by violence," it is also how they turn self-defense on its head. For by monopolizing the use of force and saying that this alone is how people can be made secure in their persons and property, the state secures neither. Instead, initiatory violence (aggression) assures that people and their property will be rendered insecure to the point that both are under constant threat of seizure.
Thus does might continue to make right (or rather, subvert the notion thereof), but acceding to it as you do only puts you on its side. And because of your faithlessness in this regard -- i.e., because you believe that man can only be governed through the perpetuation of this gross injustice -- you are, again, an apologist for evil. And making unsubstantiated claims that I "make grotesque errors in philosophy" does not change that fact.
You need to just come out and say it, Jim: "I believe that because man is inherently evil and therefore incapable of living in peace, he can only be redeemed by the Lord Jesus, whose return he must await amid the injustice that is man's natural state and whose freedom lies solely in his ability to choose whether he accepts the Lord Jesus as his supernatural redeemer."
Published: December 26, 2005 12:19 PM