Not that I want to bore you with an economic theory discussion, but I was going through “Human Action” by Ludwig von Misses and thought that his comments on free competition merit your interest. Economists, Misses argues, generally advocate for free competition – one means of achieving it, for example, is the removal of all trade barriers. But such arguments have no justification in his view because “competition can only be ‘free’ with regard to those factors of production which are not scarce and therefore not objects of human action.” Instead of free competition, Misses places emphasis on catallactic competition, which has much to do about social interaction between sellers and buyers.
Catallactic competition is emulation between people who want to surpass one another. It is not a fight, although it is usual to apply to it in a metaphorical sense the terminology of war and internecine conflict, of attack and defense, of strategy and tactics. Those who fail are not annihilated; they are removed to a place in the social system that is more modest, but more adequate to their achievements than that which they had planned to attain.
The implication of his argument?
Today people assert the same with regard to various branches of big business: You cannot challenge their position, they are too big and too powerful. But competition does not mean that anybody can prosper by simply imitating what other people do. It means the opportunity to serve the consumers in a better or cheaper way without being restrained by privileges granted to those whose vested interests the innovation hurts. What a newcomer who wants to defy the vested interests of the old established firms needs most is brains and ideas. If his project is fit to fill the most urgent of the unsatisfied needs of the consumers or to purvey them at a cheaper price than their old purveyors, he will succeed in spite of the much talked of bigness and power of the old firms.
The book was written decades ago, but Misses’ arguments are still relevant today. Competition is much about social interaction and “brains and ideas” are the key aspects of entrepreneurship. However, “brains and ideas” are not the only driving force behind entrepreneurship. The other half has a lot to do with the environment within which you can put your entrepreneurial ideas/skills to use. Your ideas can only take you so far if it takes you years to enforce a contract or months to simply get a license to operate.
Published Date: March 15, 2006