While I’m doing simple caveman economics, I want to make a very simple point about market competition that I find useful to keep in mind. The fact that markets are “competitive” confuses a lot of people into thinking markets involve some sort of dog-eat-dog zero sum bloodsport. But the competition is competition for the ability to cooperate with other folks in the market. When I cut my prices to undersell the other guy, what I’m doing is trying to give the consumer the most attractive terms of cooperation. In the market, people are clamoring to cooperate with you! They’re trying to make you even better off than the other guys who are also trying to make you better. (Think of those Lending Tree commercials where bankers are in your living room falling over each other to give you the lowest interest rate.) If you think of market competition as competitive cooperation, the market will start to look like this incredible system of distributed niceness. So when you buy something today, be sure to smile.
Will Wilkinson
The Sweet Release of Reason
I make this point to my students all the time. Especially when discussing efficiency. No one gets this term. Then you say gains from trade, and they still just stare at you.
Then I say dammit people. Trade is an amazing invention whereby two people have their level of happiness increased without anyone being made worse off. Efficiency is the relative level of happiness created from thin air.
And I say this real damn loud and stare the kids right in the face. And I don’t stop until everyone of them has little gestalt switch where they realize the miraculous power of the market.
And there’s hugs and crying.
I heart markets.
So when you buy something today, be sure to smile.
Until you look at the receipt and see the sales tax paid, then frown instead.
Actually, Will, this model is even more stark when it comes to governments and their regulations. States, counties, and municipialities will climb all over each other to make life more attractive and bountiful for companies so that they’ll relocate there. They’ll tell companies, “Just do what you want to–no special hoops for YOU–just as long as you do it HERE.”
People often get confused about economics because they think it’s impersonal. They think economics is about statistics and money and odd-sounding terms like “free markets.” But economics is about people and their behavior, and free markets are desirable because it’s just a term for free people doing things that make sense.
We can see why you are employed by the Cato Institute! Yes, the market is a mixture of competition and cooperation, but the fact that you might compete to cooperate doesn’t mean you still aren’t competing with someone (while cooperating with someone else). You might not even know your competitors, if they manage to secretly work on and then market a product that undercuts your market by all of a sudden “cooperating” out of the blue with what you thought were loyal customers. You know, creative destruction and all that. Strangely going unmentioned in your little paean. Also unmentioned is the fact that market interactions are not single pointwise operations. A person might be better after one voluntary exchange, but not after a few set up some tacit expectations. The pattern here is similar too: if the expectations are suddently not filled because the “cooperator” has decided to “cooperate” with someone else, you will only point out the new “voluntary exchange” that makes the two parties better, but ignore what happens to the now-excluded loser. And shall we mention advertising? Advertising is not just informing, is it? It helps to confuse people as to whether they really are better off after an exchange. And don’t forget luxury fever either.
Pingback: iurqyda
I make this point to my students all the time. Especially when discussing efficiency. No one gets this term. Then you say gains from trade, and they still just stare at you.
Then I say dammit people. Trade is an amazing invention whereby two people have their level of happiness increased without anyone being made worse off. Efficiency is the relative level of happiness created from thin air.
And I say this real damn loud and stare the kids right in the face. And I don’t stop until everyone of them has little gestalt switch where they realize the miraculous power of the market.
And there’s hugs and crying.
I heart markets.
So when you buy something today, be sure to smile.
Until you look at the receipt and see the sales tax paid, then frown instead.
Actually, Will, this model is even more stark when it comes to governments and their regulations. States, counties, and municipialities will climb all over each other to make life more attractive and bountiful for companies so that they’ll relocate there. They’ll tell companies, “Just do what you want to–no special hoops for YOU–just as long as you do it HERE.”
People often get confused about economics because they think it’s impersonal. They think economics is about statistics and money and odd-sounding terms like “free markets.” But economics is about people and their behavior, and free markets are desirable because it’s just a term for free people doing things that make sense.
We can see why you are employed by the Cato Institute! Yes, the market is a mixture of competition and cooperation, but the fact that you might compete to cooperate doesn’t mean you still aren’t competing with someone (while cooperating with someone else). You might not even know your competitors, if they manage to secretly work on and then market a product that undercuts your market by all of a sudden “cooperating” out of the blue with what you thought were loyal customers. You know, creative destruction and all that. Strangely going unmentioned in your little paean. Also unmentioned is the fact that market interactions are not single pointwise operations. A person might be better after one voluntary exchange, but not after a few set up some tacit expectations. The pattern here is similar too: if the expectations are suddently not filled because the “cooperator” has decided to “cooperate” with someone else, you will only point out the new “voluntary exchange” that makes the two parties better, but ignore what happens to the now-excluded loser. And shall we mention advertising? Advertising is not just informing, is it? It helps to confuse people as to whether they really are better off after an exchange. And don’t forget luxury fever either.