Nathan Rosenberg: The historical outcome of this long-term freedom to conduct experiments which, as I have argued, has been the central feature of western capitalism, has been an economy characterized by a truly extraordinary pattern of organizational diversity. This diversity may usefully be thought of as the end result of a process of social evolution in which a wide range of organizational forms has been introduced, and in which firms have been allowed to grow to sizes that were influenced by underlying conditions of technology, location, market size, range of products, etc. The particular outcomes achieved with respect to firm size, pattern of ownership, product mix, etc., have been essentially determined by a market process in which the underlying conditions of different industries have generated patterns of survival reflecting their own special circumstances, not some a priori notion of a single best model to which they were expected to adhere.
Don Boudreaux: Economic competition is not only about keeping prices as low as possible… Nor is economic competition about ensuring that every aspiring producer in every industry will survive in competition with industry incumbents or with new upstarts. Economic competition creates new products, new product features, new organizational forms, new contractual terms, new methods of production and of marketing and of delivery and of service. In markets, those features that serve consumers best survive, but only as long as no other features come along to out-compete them.
… The dynamism of market competition is controlled by no one – and, if it is to continue to operate effectively, is controllable by no one. Many people fear this dynamism.
That was Don Boudreaux blogging about Nathan Rosenberg’s paper, “Economic Experiments“.
Competition is not about inviting companies to compete on lowering the price of a buyer-specified end-item. Perhaps in some areas of commodity production, the strategy makes sense.
The standard advertise and bid form of procurement contracts — mandated by the Competition in Contracting Act — does not work well for major systems development. The great benefit of competition is that it results in a level of diversity and innovative solutions that couldn’t have been foreseen through rational analysis alone.
Leave a Reply