Guilds and Competition: A Response to Objections of Laissez Faire

Abstract

This paper offers a critique of laissez-faire objections to the guild system from the perspective of Catholic social teaching a presents the economic reasons for a restoration of the guild system as a functional economic model. The laissez-faire argument is that 1) the free competition on the supply side is in the best interest of the consumer, 2) each member of the society is a consumer, 3) ergo: free competition on the supply side is a common good, i. e. a goal which the state should follow. The author argues that 1) unlike majority of goods and services, two goods are becoming scarcer as a result of free competition on the supply side: time and land, 2) consumers which prefer consumption of leisure time and land are worse off as a result of free competition on the supply side, 3) ergo: the conclusion that free competition on the supply side is always a common good is invalid. According to the author, leisure time and land are essential for a good operation of a well-functioning family which is essential for a well-functioning state. In this connection, the author contends that the primary goal and raison d’etre of the guilds is control of the entrance of new producers to the industry, so that the incumbents who want to pay just (family) wages and/or prefer leisure time necessary for operation of a well-functioning family are not forced to change their behavior by the competitive pressure of the newcomers. Besides, a control of the entrance will limit the pressure to lowering wages below the level of the just (family) wage. To the objection of “no free lunch” the author responds: yes, the employers are facing a trade-off. In exchange for a possibly high but uncertain profit margin they will receive a lower but certain profit margin. To the objection of allocational inefficiency and economic stagnation resulting from suppressing external innovations, the author responds: 1) an external innovator can have his discovery patented and instead of the transitory entrepreneurial profit enjoy the incomes from the licenses; 2) the competitive pressure is only one possible drive of the economic growth, another drive is the human laziness which is constant across the economic systems.