From: glevy@PRATT.EDU
Date: Mon Apr 17 2006 - 19:49:14 EDT
> Before radical economist call "perfect competition" by its right > name, that is "perfect stagnation" - this fight is not over. There is > not an iota of competition in "perfect competition" - only utter > stagnation. From a welfare maximizing point of view "perfect > competition" is definitely not a place we want to be. Hi Anders, Yes, I agree with you about the pernicious effects of assuming perfect competition (p.c.). You highlight the consequences of assuming p.c. in macroeconomics. But, the consequences of assuming p.e. are equally -- if not more -- mis-directing when we look at the dynamic processes at work in individual branches of production. For instance, the marginal utility theory of consumer choice & the doctrine of consumer sovereignty assume p.c. So long as this market structure is assumed, the dynamics at work in individual markets and the relation between firms and consumers remains mystified. For example, in p.c. there is no advertising or marketing -- indeed, it is viewed as 'wasteful' and redundant because perfect information on the part of consumers about the prices and qualities of commodities is assumed in a p.c. market. These assumptions obscure the real relations at work in the marketplace and lead to the fantasy that consumers control the marketplace and issue firms their marching orders through their consumer purchases! When these very restrictive assumptions are dropped, a very different picture emerges about who controls whom and how in the marketplace. I think radical economists often underestimate the merit of a critique based on the challenging of assumptions. Is p.c. an 'internally consistent' theory? Who cares? -- it fails a larger, and most significant, test since it precludes an adequate grasp of the subject matter. In solidarity, Jerry
This archive was generated by hypermail 2.1.5 : Sun Apr 30 2006 - 00:00:06 EDT