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ECON 2b COMPETITION

I reserve the right to be wrong.



Competition is the by-product of more than one participant offering the stuff on the supply side of those diagrams in ECON 2a.



PERFECT COMPETITION

This would be a situation where supply and demand are in perfect harmony, and prices are always in equilibrium. That doesn't mean they stay the same, it just means that prices always represent precisely the value placed on the exchange by both sides of it!

Real-life information-flow is imperfect due to needing time to propagate to all those concerned. So real markets are imperfect, which is to say that competition itself is imperfect



IMPERFECT COMPETITION

Demand excess leads to prices rising above the market equilibrium price until the dearth of supply has been undone by competitors and the two factors are aligned again,

Supply excess leads to prices falling below the market equilibrium price until the excess of supply has been bought up and the two factors are aligned again,

It's probably true that in real life prices are always slightly too high or too low, and are always in the process of correcting while never quite getting there. But even that is incredible when you consider that with all their best brains focused on realising their economic plan, the people of the Soviet Union never even had enough toilet tissue to actually wipe their arses.*



MONOPOLY

Sometimes one firm alone serves a particular market, so the market is being coerced from the supply side. That means PEMEX has the automobile owners of Mexico by the short and curlies.

Usually monopolies are guaranteed by acts of government, since without that protection any civilian firm is a target in the sights of another, leaner, hungrier one.

Was it monopolistic of me to point to my ECON 2a blog post rather than to the original source of the diagrams in that post? Undoubtedly. But then at this moment I don't feel under pressure to do otherwise. Perhaps in future I will!



MONOPOLISTIC COMPETITION

There are many firms in the industry offering products, but their products are so different from each other that even though they are in the same industry each company is actually under very little competitive pressure compared to Perfect and Imperfect Competition. Think Apple.



OLIGOPOLY

A small clique of separate firms collude or at least compete less than they would in proper competition. This will probably be the result of these few firms operating in a market where the state has introduced regulations that make it hard for a new firm to join in. This is called raising the barriers to entry.

This pretty much sums up the defence industries of most European Union countries, and of the finance industry in the UK, which is more heavily regulated than Education and Healthcare; and in the UK those are almost monopolised under state ownership!



MONOPSONY

Like monopoly in reverse. Governments are monopsonists of their national defence industries, because the government of that state is pretty much the only customer. And that's monopsony for ya! Market coercion from the demand side! Another example of a single customer with many suppliers is, again, Apple!

Now these are particular market situations, but what policies toward markets as a whole actually give rise to them? After all, a government is always there, passing laws to do thus or thus. Governments can choose to restrict and/or intervene in markets or leave them to their natural flow. Like dipping a toe in desert sand.



FREE MARKETS

The state owns pretty much nothing, and takes no action to direct the economy thus or thus. People see to their own affairs and those of their communities directly, and people are directly accountable for their actions, to themselves, to their deities, and to their communities. Ayn Rand I am not.



CORPORATISM

The state leaves ownership of the means of production in private hands but is the de facto economic manager, as all the major decisions lie with the state. This was the economic model of the Fascist regimes of Europe, and remains the most widespread economic model on Earth at the moment, albeit generally not entire economies, just particular industries within them, such as the railway industry in the United Kingdom.

Corporatism can be said to create oligopoly, with perhaps the best example today being Japan, a country where almost all of the means of production are entirely privately held, yet the state, through METI, and its predecessor MITI, has routinely ordered the keiretsu to increase or decrease their output in various products, without reference to the market forces around them, and in turn has offered these corporations the ear of the Japanese government when they want one or other protectionist barrier knocked down or, in most cases, put up. The most successful lot of all though would have to be rice farmers, who have almost the entire market for rice to themselves, since Japan slaps absurd import tariffs on foreign rice.



SOCIALISM

The State owns all of the means of production. Private property may or may not exist within this country, but anything that's capital is held by the state, presumably including all computers, unless privately owned, semi-crippled computers without keyboards are offered on sale to people.

On this point, two useful definitions of Socialism for me concern the degree to which it veers away from the Capitalist condition.

Firstly, a system in which capital accumulation continues in order for the living-standards and positive freedom of the population to improve over time as they do in a capitalist society. This arrangement would be the one that continues to respect private property, like Argentina at the moment, or Venezuela under Hugo Chavez, and not so much under Nicolas Maduro.

Secondly, and going further on, I see a system that rejects capital accumulation itself as immoral. This form would probably do away with private property. Now, this could be problematic, because the statistical correlation between the degree of enforcement of property rights, and the murder rate, is neatly negative; so the stronger the property rights, the lower the murder rate.



So there you have it. Competition, and the situations that induce and obstruct it. And that's all folks!!



* - the economic calculation problem. I will deal with this in a future blog my pets!

This was awesome...  http://www.libertarian.co.uk/lapubs/pubindex.htm



On the next Ecomony Blogtime; Mattman dithers and dallies and finally gives the public what they want... hardcore nudity!

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