competition models of economic policy: "What do we want competiton to do for us?"
This Paper deals with competition. It's about the different explanations of the economists on the conditions of effective competition and thus a well-functioning, prosperous market economy. The following serves as the necessary pre-understanding for the next essay, "The European Crisis - Part 4" create, in which will be a comparative analysis of the various competition Orientierunsgwertes of role models for the European economic policy.
As long as no agreement within the EU mission in question was made to float all considerations for a better coordination of economic policies in the EU and an EU economic government in a vacuum. Because the economic policies on an idea of prospering under what conditions the market economy not waive.
Competition is the engine of the market economy. It is important to know for economic policy, what they are doing the one hand, and what they must refrain from the other, so that engine runs smoothly.
sounds like a nostalgic throwback to times when the economists for economic policy were still dominant. Who would not agree with the statement that they no longer are today? The practical policy is based on empirical economic data, but above all to economic interests, represented by an army of lobbyists. Those who have no lobby that exists in the eyes of politicians pointedly expressed only as a residual, which is hardly relevant for policy decisions.
In fact, the economic and fiscal policy caused by the crisis just got so into heavy waters. For first in economically turbulent times of the benchmark empirical and in principle from the past-derived data for practical politics is often very low. Second is seen the influence of lobbyists on politics in the population as well as in many parts of the economy increasingly critical. have
But apart from just The leading economists own problems. Because due to the financial market and economic crisis it is theory building collapsed into itself. The crisis has brought neo-classical, neo-Keynesian economists, and also in fundamental explanation difficulties. It has exposed the limited explanatory power of their theories. For this reason, could the leading economists of the current policy really help much, they should reflect and knock-giving orientation to the Council for the reorientation of economic policy in the EU with them. However, the policy
would likely ask for good advice about not the economic policy paradigm. Why not? It's simple: Because everyone thinks he knows how to work and market competition.
That's the problem. Because this is a Irtum.
First are about it not even the economists who know it really would have to agree. The crisis has the value of their knowledge about the functioning of markets also challenged on a fundamental level. Second many politicians are likely to not even be aware that its economic policy debates, arguments and actions very well in a particular subject, from the theory of competition-derived understanding of the functioning of competitive markets is based.
was in fact the economic, especially the economic model debate already completed by the end of the 60s. Since then, at least in politics, no one seems more interested in this question. The time taken over its competition and economic model was not questioned - either in Germany or in another developed country. Politicians have internalized in these four decades, which means the favored model. But many have forgotten over the years, going back to that competitive theoretical base their views and sometimes as often as they say. They are not aware that it is either way to theories is based on controversial assumptions, and that so far it also fraught with risks, they to follow in practical economic policy blindly, no matter whether this is done consciously or unconsciously.
Do you ever try! Ask your politicians, they know what competitive theories of progress and what has it added to the economists in this field. You will find here: The concept of competition has become an unthinking and unconscious self-evident.
sees it as the fact that liberal politicians like to claim either one is for competition and the market economy or against. This statement about economic view of nonsense, because it suggests erroneously prevails perfect clarity, the Conditions for a functioning and prosperous market and therefore is the way of economic policies mapped out.
precisely why many politicians are subject to a further error. If they take action to improve the international competitiveness of the company, then they do this usually on the grounds that it was good for growth and employment. This will, however, improperly mixed together two different aspects, namely, first the ability of companies to compete and second the ability of competition, growth, and it also has positive effects on employment to cause .
If this separation is omitted, the actual competition, act under which the companies in markets with the ideal type of performance competition ("effective competition") equated the effects of competition theory, the order of the markets and economic prosperity . That this is happening is a direct result of extensive decoupling of politics from economic theory base. So anyone who supported the opportunity to strengthen the competitiveness of business enterprises and, ultimately, the competitiveness of their economy, which has thus not necessarily have to functioning markets and used for growth and jobs - an argument that for example, the moves by the Federal Government for the proposed EU "Pact for Competitiveness in a new light.
appears Against this background, it just significant in light of the current debate on EU economic governance and better coordination of national economic policies, which allow economic model or the antitrust model get the importance it deserves. This is even more than in the current debate plays no role and thus the debate is missing a key factor. This is a sign of how far the politicians have removed Europe from the basics and prerequisites of successful economic policy.
The notion of economists "effective competition" (synonymously used terms: "perfect competition" , "effective competition" and "performance competition" ) and hence of optimal functioning markets changed over time and differentiated. There are next to each other so different competition and different theories, derived from models of competition orientation as a basis for economic policy. This is not unimportant. Because that ultimately reflects the development and Diversification of higher overall economic theory again, in which the competition theories are embedded with the acquisition of certain basic assumptions. This is the crisis, has fallen into the economic theory as a result of the financial market and global economic crisis, a crisis of competition theories and models. This illustrates the challenge facing the EU is provided in the search for and understanding of a European economic policy and do so regardless of the question of how this organization will ultimately be implemented (centralized or decentralized).
Four competition theories and conceptions of and derived competitive and economic policy models can be distinguished in substance and are to be discussed hereinafter
- Perfect competition
- Operational competition
- Free competition
- evolutionary competition
first The model of "perfect competition" - precise, but unrealistic conditions of effective competition
The first concrete formulation of conditions for perfect competition comes from the neoclassical equilibrium theory and is about 90 years old. It is about the so-called model of "perfect competition" Strictly speaking, the model was not a competition, however, were from the later derived by modifying the underlying conditions, various competition models for economic policy. The conditions are as follows:
- the market form of Polypol (many buyers and sellers, each with a small market share, the market price is therefore influenced to no competitors and may therefore only adjust the amount offered);
- homogeneity - that is absolute uniformity of all things, all people of the area and also in terms of time;
- full market transparency, that is, all Economic agents have complete visibility and foresight;
- unlimited mobility and divisibility of production factors and goods;
- infinite reaction speed of all actors in adaptation processes in markets;
- exist there for operators no barriers to market entry and market exit but also
- strict rational behavior of all market participants, symbolized in the figure of "homo economicus";
- all economic agents have complete knowledge and
- the state refrains from any intervention in the market.
It is evident that it is unrealistic to assume all the conditions could be produced in the real economy. This finding was, however, by slowly. Only in the late 20's began with the economists of the slow departure from the "perfect competition" as a model for effective competition in real markets. It played a role, that the very demand polypolistic markets was something that was in reality less and less a match. Oligopolistic markets - as the market, between the Polypol (very many suppliers) and the monopoly (one supplier) - were against becoming more common.
went in the late 20s and early 30s economists ( P. Sraffa (1926) , later at the same time also EH Chamberlain (1933 - "Monopolistic Competition") and J. Robinson (1933 - "Imperfect Competition" ) ) so the idea of the extent to markets in conditions unvollkommmenen, ie the conditions of "perfect competition" deviant competition equilibrium is reached. In essence, the - from a theoretical point of view - yes, which laid the foundation for the theoretical legitimacy competitive oligopolistic markets.
It was there on the edge noticed no coincidence that these considerations arose in a historical period in which - particularly in the U.S. - clearly observe a sharp rise in corporate concentration was. Similarly, it should be about even with the work of R. Hilferding ( The financial capital, 1910 ) and JA Schumpeter (Theory of Economic Development, 1912) behaved, but opposite in sign. They dealt with at a time critical monopolistic structures had gezietigt in this very negative consequences, particularly in the U.S., so that the policy drew the emergency brake (break-up of American Tobacco and Standard Oil (both 1911)).
While the U.S. so gradually in the 30 years the oligopoly in the heart of attempts to define advanced effective competition, the efforts were in Germany, first in a different direction. These were that the ordo-liberal economist W. Eucken (1939) - one of the fathers of the concept of "social market economy" - as a practical modification of the "perfect competition" the "perfect competition" as a model for economic policy. He just looked at a condition of the original neoclassical model as a key prerequisite for effective competition, namely the polypolistic market structure and thus stood in contrast to the prevailing view in the United States.
There, the oligopoly but for a longer transitional period was initially considered only as a kind 'second best' (after the unworkable "perfect competition"). The replacement was at the time but also encouraged by the so-called "antidote These" . This thesis is given and therefore imperfect oligopolistic markets can increase the effectiveness of competition if you allow other imperfections. For example, could therefore act to reduce market transparency in oligopolistic markets as an antidote, because it complicates spontaneous parallel behavior of oligopolists.
second "Workable competition" - began to market oligopolies are ideal
end of the 30s in the U.S., the final break with the "perfect competition". Stattdesen was looking for a more realistic and workable definition of effective competition, notably through the empirical research of the so-called "Industrial Organization" (Industrial Economics) in the U.S. (Harvard) helped.
The approach was to conform to "Workable Competition" ("workable competition") refers to ( JM Clark (1940) ). Strictly speaking, these are a whole family Definition of ideal competition on the basis of the oligopoly, the economists hinischtlich because of the conditions for "effective competition" at odds were - and still are. There were developed many different sets of criteria for "effective competition". For example, is also the approach of the German economists Kantzenbach E. (1967) to the only three criteria (number of suppliers, product heterogeneity and market transparency) to be relevant to the determination of "optimal level of competition" looked at markets. As representative of this family is the concept of "contestable markets" ("vulnerable markets") by WJ Baumol (1982) , which is in seen as the only condition for effective competition, the openness of the market (no barriers to entry).
Four additional observations are important for understanding the theory of "workable competition" as well as the delineation of the "perfect competition" is important:
- Although the specification of the competition was that "workable competition" very strong empirical from the benefited research , it is still basically continue on the foundation of neoclassical equilibrium theory. In other words, is the "workable competition" the basic assumptions of neoclassical economic theory into question, but rather builds on that. This is especially true for the assumption that competition is understood fundamentally as a mechanism - like the "perfect competition" - is in principle automatic and thus continue the condition that the state should not intervene in the market process, is maintained. sets
- While the "perfect competition" exact conditions for effective competition, all of which must be fulfilled, characterized the idea of "workable competition" by the fact that the criteria considered relevant only a range is given, within which all forms of market characteristics are accepted as legitimate. For example, calls for the "perfect competition" is a "perfect market transparency" and "homogeneity of all goods." The "effective competition", however, different degrees of market transparency and product heterogeneity are allowed. Further, the margins were due beipspielsweise adapted by the globalization of markets so that today oligopolies with much higher levels of business concentration than in the 60 years are accepted and allowed - to see well to the wave of mega-mergers in recent years.
- As with the "perfect competition" is also at the "functional Competition ", the definition of very much the type of market. While the former the Polypol regarded as a market ideal, it is in the latter, the oligopoly. How central the market form for the definition of effective competition in the two neoclassical approach is demonstrated by the example of W. Eucken, whose model of "perfect competition" in general, only the market form as a condition of receiving (Polypol) and also in E. Kantzenbach in its approach ("best of competition" / "workable competition"), the market structure (oligopoly) is one of three conditions.
- is also in the two neoclassical views competition due to the strong focus the market form a preference regarding the size of the company before. While the "perfect competition" as well as variations thereof, such as W. Eucken "perfect competition", due to economic policy through its market ideal of the attention to small and medium-sized enterprises (SMEs), puts the mission statement "workable competition" with the recommendation of the oligopoly economically large companies at the center.
Until the early 50's competition was still not perceived dynamic but static. That is, the "perfect competition" was based on a static concept of competition . The means the conditions for effective competition is an ideal market universal was defined, similar to a snapshot of a market or a photograph. And this market ideal was identified with the ideal of competition - there was also no further description or explanation of the competition itself, the change in market conditions during the period, in other words, the development of markets, was not considered. Because thus the market view was static, which also met on the Wettbewerbsuaffassung.
That changed in the theory of "workable competition" that are caused by the roots in the neoclassical Theory also defines a static market ideal - in fact, many different market ideals defined. The competition itself was, however, be regarded as a dynamic process, that is.
Excursion: competition began as a dynamic process
the early 50's in economics, the dynamic concept of competition enforced. Competition has now been described themselves regardless of the conditions for effective competition and defined - in the case of "workable competition" - from the market ideal. In addition to the effective competition defined market competition Ideal Ideal joined that the ideal course of the competitive process or, in other words, the operation defined competition. This innovation came to the center of the competition theory as well as of economic interest.
competition as a dynamic process ( H. Arndt (1952) , JM Clark (1961) ) was from then on as an ideally infinite series of innovative entrepreneurial competition advances and each subsequent prosecution phases by the fact challenged competitors described. This process is the entrepreneurial desire to consider using innovative products on the demand (that is, through innovation) is driven. Each innovative attempt by a competitor forcing the other player in a market, either follow suit with a similar product (imitation) to the innovation lost market share to win back or the competition with its own innovative approach to surpass. This keeps the process - in the ideal image - always in motion.
The competitive process or the operation of competition by economists today expressed their agreement in this way. This is perhaps the reason that today everyone believes to know what is "competition". Because an alternative does not exist. This explains, therefore, why has settled into the minds of many the false belief that the alternative to "competition" the planned economy, or else is expressed: either there is competition or it does not exist. That is so thought to have to answer for the economists. Because they have failed, between the competition Ideal , which is a specific quality of the competitive process (infinite ongoing competitive process) and the basic operation of the competition , ie the s chlichten statement the competitive process (innovative thrust force competitors to adapt) to distinguish.
This is understandable, as both in principle in the classical and neoclassical economic theory in competition in markets as self-running or self-regulating is defined. This hypothesis is - with one exception (SL Eichner (2002) ) - all based on competition theory and approaches to competition mission statements. Only if the validity is assumed, it is unnecessary between the basic functioning of competition and a competition to distinguish Ideal .. But that is proving to be problematic today, because the financial market crisis big doubts about this hypothesis, that is, the existence of the self-regulating market forces, has stirred up.
that nowadays still are several alternative, competing theories of competition or competition models and not an individual has emerged as superior to a simple reason: There are in economics is not clear how effective competition can be achieved.
There is still disagreement on the conditions under which runs the competition-driven innovation process smoothly and not only the markets and market forces arranged in a kind of dynamic balance of power has, but also can prosper and the economy. It is therefore also It is for economic policy at the orientation in a competition model can be no assurance areall exactly what it promises.
Moreover, it is quite significant that the transition to a process-understanding and thus competition is the emphasis on the importance of innovation in a historical period (50 years), was built in the neoclassical growth theory, the . For this is interpreted as an indication of how strongly the time the question of economic policy to the fore, can be explained as economic growth and thus ultimately promote economic and political. It is equally important in this context that the rise growth theory of the much older approach, dynamic and innovative competition for the explanation of "economic development" - as neo-classical counter-proposal - use (especially JA Schumpeter (1912) , H. Arndt (1952, 1992) Others ), gradually lost its importance. For thus explaining why to the financial and economic crisis saw in the crisis-ridden neo-classical theory in general and the neoclassical growth theory in particular no alternative and spoke instead of a theoretical deficit. This is not entirely accurate.
third Free competition - rejection of any market ideal
The "free competition" as a theory, as well as the role model ( FA Hayek (1968) , E. Hoppmann (1966) others) is the classical economic theory of A. Smith (Wealth of Nations (1776) ) back and was always seen as the strongest antidote to the neo-classical theories dominated competition - even from politics.
The three main differences from the model of "perfect competition", its variations and the model for "workable competition" are:
- The economic theoretical roots (instead of traditional neoclassical theory);
- the rejection of a Market ideal as a base for the definition of effective competition. This is a direct consequence of the economic theoretical anchoring, as the economic theory of Adam Smith has a dynamically developing economy (and thus developing markets) to content and not, as neoclassical economic theory, a development-free (static) circular economy;
- rejection of any results-based standard for effective competition, it is therefore not measured by its results, more so defines this competition theory in general not ideal for effective competition, instead of competition is normalized negative, that is, it is defined, under which Conditions no "free" or effective competition exists.
Of the representatives of the competition theory of "free competition", in view of the theory of "workable competition" highlighted critical, a market ideal can not the fact, to ensure that changes in the development of markets, including especially the market structure . In new markets, the innovating firm's monopoly rule. By the odds, however, attracted imitators, so that increases the number of providers continues until the market potential is exhausted (Polypol) and employing a cut-throat competition. The resulting onset of corporate consolidation process then ensures that the number of suppliers continues to decrease (oligopoly).
Like the neo-classical on the economics-based competition theory is based, however, the theory of "free competition" in the hypothesis of self-running and self-regulating Competition of, because that is the central thesis of the classical economic theory of A. Smith , symbolized in his "invisible hand". Again, the competition is seen as a dynamic process - as described above - and also as a competitive ideal.
Cuts is therefore expressed in this competition theory, the only condition for effective competition and economic prosperity, for all market players the freedom to compete is and that means freedom from government interference or tutelage - the creed of economic liberalism 'and the reason for deregulation requirements. The possibility that competition could reduce by itself the freedom of market participants will not be seen. "Free competition" does not mean "laissez faire". But it means that the state may intervene in the markets. Furthermore, it should set a framework of rules (governance) for the action on markets that ensures the greatest possible degree of entrepreneurial freedom, but no one discriminated against.
For any other competition model the trust in the self-regulating market forces so central and so fully. In fact, competition can be measured according to this theory, neither his results nor results-based targeted in any way affected (by the state). Market and competitive processes in this view open processes and it is argued, the State did not always have sufficient information to influence competitive processes targeted positively. The crux of the paradigm
however, lies in the measurement of freedom and for economic policy in addition that it is relatively little action orientation .
4th "Evolutionary competition" - of changing competition as an ideal
The theory of competition "Evolutionary Competition ( SL Eichner (2002) ) is not connected with the neoclassical theory, but, as with the" free competition "in the classical economic theory of A. Smith . Here, too, as assumed in the "free competition" in developing markets, so that is anathema to define effective competition on a market ideal. However, for this competition theory, the hypothesis of generally self-running and self-regulating Competitive process abandoned.
has the two crucial consequences:
- It is synonymous with the absence of justification for the neoclassical the-based competition theories or mission statement and, to a stricter form of the concept of "free competition" required " non-intervention underlies . Because this condition can generally be represented by only useful if competition is generally regarded as self-running and self-regulating.
- opens the other hand, by giving up the thesis of self-running competition, the possibility different qualities of the competitive process or to distinguish forms of competition unfold, dependent on the degree of change, innovation activities in the economy (economic significance ). Competition drives with this logic is pushing the development of markets, changes in the development of markets but also himself (evulotorischer competition). In other words, the basic operation of competition (innovative thrust forcing competitors to adjust) not also elevated to the rank of Wettbewerbsieals (infinte domain ongoing prosperity and effecting process).
competition can According to this theory affect the development of markets, growth and employment in very different ways. It depends on the type of competition, but above all of the time period over which dominates a specific form of competition in markets. Therefore, no specific form of competition is defined as an effective competition. Rather, it is important that the form of competition over time, transforms again and again because this is the prerequisite for developing markets.
The predominant form of competition at a time can and will often differ from market to market. Competition can be in accordance with this theory of competition markets quite and negative effects and will also develop to a halt. The measure of effective competition or "evolutionary competition" is therefore neither a specific degree of freedom still a results standard, but the economic development quality the competitive process, ie the extent , which contributes to the competition within a time period for the development of a market.
While effective competition in the other theories of competition is always defined as the effective price competition, it is the "evolutionary Competition" effective competition in the first place it on hold to be economically significant innovations to market developments in transition. Competition in markets is under no time This view according to pure price competition, but always a mix of price and quality competition . Which of the basic parameters of functionality, quality, cost and price competition in the deciding process is dependent on the market situation and the competitive behavior of market participants.
Thus, the basic possibilities of the model selection for economic policy, outlined specifically for the European Union, and the basis for "The European crisis - Part 4" down.
To make things not to be directly grind again, there is now the new poll. 
