Responsible Business, Civil Society, and Government in an Open Society
The author analyses competition as one of four coordinating mechanisms helping agents mutually to orientate their actions, avoid chaos, and produce social order. Competition is a key dimension of developed societies. It helps to structure and is also conducive to social change. Competing agents constrain one another, making it hard for anyone to change their position. They discover new routines the best of which may later be institutionalized. Competition is a solvent of power but only in relatively equal societies. Entrenched wealth or status restricts competition, thus impoverishing social order. The author also evaluates the theory of competition to explore such topics as corporate social responsibility, relations between government, business and civil society, and reflexivity in social sciences.
In this annex I collect insights from various strands of mostly economic literature that are not central to the book’s arguments but nevertheless illuminate the phenomenon of competition from various perspectives.
Until the 1970s, a dominant paradigm in economics for analysing competition was the so-called Harvard School. According to this paradigm, in simplest terms, any departure from perfect competition is an aberration, which necessarily leads to higher prices and thus needs correcting. A different strand of economic theory, making the case for effectiveness of competitive process even in absence of conditions of perfect competition, is associated with the Chicago School. These scholars argue that industry structure is not permanent. It changes in response to technological and organisational inventions, which may come from within the industry, or from external environment, for example with new entrants. Monopolies come and go. In a seminal article published in 1973, Harold Demsetz argued that industry structure should be understood as a product of competition process. This was a response to the policy implications of the perfect competition paradigm, according to which concentration was coterminous with excessive market power and that it was necessarily harmful to consumers. Demsetz argued that much harm could be done by overzealous de-concentration policies.
According to Demsetz and his followers, in a world in which information and resource mobility can be secured only at a cost, an industry will become more concentrated under competitive conditions only if a differential advantage in expanding output develops in...
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