Competition in Free Markets

wine tomato

I ended the previous bit with the claim that competition in a second-best world can be bad.

Competition in a free market is nearly always good because it is that process which provides the incentive to market participants to do the best they can, which leads to all the advances we all enjoy.

Remember that every one of us is a market participant. Therefore we all have to compete. It doesn’t have to be cutthroat but it we cannot avoid competing.

But what about cooperation? Doesn’t that matter? Yes. It matters enormously. We even have to compete in our cooperation. Individuals who are good at cooperating out compete those who are bad at cooperating. This holds true for higher levels of aggregation too. More cooperative, high trust cultures do better than cultures that mistrust and don’t honor their word.

In a perfect world, which in our case we don’t have, competition would always be good for everyone. Even those who lose out in their particular competition would nevertheless be better off in this world of competition because competition raises the general level of welfare, than they would be in a world without competition.

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Competition and the Creation of Wealth

This is a continuation of the brief piece about what’s wealth and where does it come from. Wealth, defined broadly, is important to us because it’s useful for our material well-being. Material well-being is not an end in itself but it is instrumental in providing the irreducible basis for our happiness and therefore it is a means to all other higher human aspirations and goals. Without a sufficiently wealthy foundation, it is hard if not impossible to live in peace and harmony with oneself and with others.
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