Thorstein Veblen’s Theory of Business Competition

Abstract

Although almost all dimensions of Thorstein Veblen's analysis of modern capitalism have attracted adequate attention, his theory of business or market competition that lies in heart of his understanding of modern capitalism has not received interest it deserves. Even though there are attempts here and there, they do not provide us with a full picture of his conceptualization of business competition. This paper aims to elaborate on Veblen's theory of business or market competition. It is argued that he, in fact, developed a very sophisticated theory of dynamic business competition based on idea that economy is more than market and as such it should be studied dynamically, holistically, and historically by primarily considering empirical phenomena instead of solely by focusing on a priori deductive mental exercises. The first section of paper elaborates on foundations of Veblen's vision of capitalist market economy. In second section, his notion of the state of industrial arts, which is starting point in dissecting his two visions of competition, is explored. While third and fourth sections elucidate his distinction between two ideas of competition, fifth section illustrates working logic of competition in contemporary capitalism. His theory of competition is assessed in final section by comparing it with other theories of competition to show innovations he introduced. The overall conclusion is that he developed a very sophisticated theory of competition essential for analyzing contemporary capitalism.