Competition: Marxian conceptions

Abstract

In the works of the classical economists such as Smith (1776) and Ricardo (1817), competition was identified as a central concept in economic theory. Free competition was regarded as the organizing and equilibrating force in an exchange society, bringing about natural prices as centres of gravity for market prices through capital flows from areas with low rates of returns to areas with high rates. Yet compared with the theory of perfect competition, classical free competition was defined more in terms of economic behaviour than of market structure (Stigler 1957; McNulty 1968; Eatwell 1982). Marx’s concept of competition, rooted in the classical theory of free competition, also refers to the behavioural activities of the capitalist firm. Marx, however, more than the classics, cast serious doubts on the stability properties of the competitive process, and he conceptualized competition as inter-firm dynamics carried out through reorganization of the firm and technical change. In this it somewhat resembles the modern theory of oligopolistic rivalry (Friedman 1982) and Schumpeter’s notion of competition as a process of ‘creative destruction’ (1943).