Competition and the Economy: Historical Perspectives

Abstract

This chapter deals with economic competition from a historical anthropological perspective. In A. Smith’s economic classicism there is an interesting anthropological tension between his two main works as well as an important theory of the invisible hand in its relation to man’s self-interest. J.S. Mill developed an idea of “economic man” as an analytical category. This classic period was followed by a neoclassical period characterized by individualism, marginal analysis, utility, need, supply and demand, rationality, mathematics, and a belief that mathematical models could give probable calculations of rational human behavior. Institutional economic theory criticized these theories from an anthropological perspective—a human being is determined by instincts and cultural habits, rationality is less decisive than supposed in neoclassicism and it is unnatural to maximize utility and happiness on the basis of self-interest. Thus, fellowship and cooperation challenged competition. Game theory (mutual dependence between human beings) and utilitarian welfare theory (the individual in society) modified classical and neoclassical economics. Facing the Depression in the 1930s, J.M. Keynes regarded state intervention instead of competitive market-based self-correction as necessary to secure employment and economic growth. This position was heavily criticized by monetarism: minimum state intervention to avoid a dangerous inflation spiral, efficient allocation of resources, economic growth, and competitive power to reduce unemployment. The last part of the chapter presents the idea of competition in some alternative economic theories: Public Choice school, the Neo-Austrian school of economics, behavioral economics, endogenous growth theory, feminist economics, and ecological economics. Despite all these critics, neoclassical economics survived.