Competition (review)

This volume, number five in the series "Critical Ideas in Economics," contains reprints of twenty-nine articles and extracts from books spanning the period from Adam Smith's Wealth of Nations (1776) to a chapter of a book by Adam M. Brandenburger and Barry J. Nalebuff (1996). The classical period is covered by excerpts from Adam Smith, David Ricardo, Augustin Cournot, John Stuart Mill, and Karl Marx. Neoclassical economists are represented by Carl Menger, Léon Walras, Francis Ysidro Edgeworth, Alfred Marshall, and John Bates Clark. For both periods, none of these authors comes as a surprise. Perfect competition is then represented by an excerpt from Frank Knight (with historical essays by George Stigler and Paul McNulty), while imperfect competition is covered by Joan Robinson, Edward Chamberlin, and J. M. Clark. There follow sections on various aspects of competition: competition as a process; competition and society; competition and strategy; and competition and antitrust. These include the economists one would expect to find here—Joseph Schumpeter, Friedrich Hayek, and Joe Bain, as well as some surprises (Michael Porter and Walton Hamilton).

Deciding what material to include on such a broad topic is always difficult, especially when some potential inclusions are already in the volumes on equilibrium. The excerpts from the classical and neoclassical periods come from the traditional canon. Although this is defensible, it would have been interesting to have some less well known figures represented. Cournot was far from the only Continental author to have things to say about competition, and it would have been helpful to have the views of a subjective value theorist (perhaps a pre-Smithian writer or Jean-Baptiste Say) and a German economist represented. In the neoclassical period, there are no contributions representing approaches to competition that have now become unorthodox (where is Social Darwinism in the volume?). Including Mary Morgan's 1993 article on notions of competition would have provided an alternative to selecting from the original sources. When it comes to the twentieth century the emphasis is on loosely "Austrian" approaches. These are important but it leads to the neglect of those economists who helped establish the hegemony of perfect competition. For example, John Hicks's reasons for concentrating on perfect competition would have been useful, as would the views on competition of someone, such as Abba Lerner, involved on the "other" side of the socialist calculation debate, or even Robert Triffin. The modern literature could have been represented by an article on patent races to illustrate the way in which the process view of competition is now handled or even by William J. Baumol's work on contestability. Of course, to do this could easily have expanded the collection to more than a single volume, which may not have been an option.

With any collection of this nature, the introduction is crucial. The volume's thirty-three-page introduction provides an interesting overview of the topic that could easily be recommended, alongside others. The range of material cited in the endnotes makes one wish the material was listed in an alphabetical bibliography. Equally helpful would have been a list of the secondary literature (on, for example, the emergence of perfect and imperfect competition) that could not be reprinted in the volume. There is much in the introduction that is worth reading: the contrast between the process and end-state views of competition; the integration into the story of Porter's work, often ignored by economists; and a discussion of antitrust and economists' surprising attitudes toward the Sherman Act.

High's main argument concerns the pivotal role of Frank Knight. He claims that it was not until Risk, Uncertainty, and Profit (1921) that the meaning of competition was examined closely and that the book helped bring about a revolution. It is, he claims, surprising that this revolution did not occur until the 1920s. High is certainly correct in arguing that Knight's book was very important. However, I am not completely convinced...