Dog-Eat-Dog; M. N. Buechner

And it is a not infrequent com plaint of businessmen who have gone to VVashington to seek sub sidies or other forms of govern ment support. Mr. Buechner is an assistant professor in the College of Business Administration, St. John's University, Jamaica, N. Y. "This paper," he says, "has benefited from the advice and criti cism of Kathleen Edwards." 614 Further, the concept of dog-eat dog competition is used to support what is one of the heaviest weap ons in the anticapitalist arsenal, the charge that a free economy generates monopolies and monop oly power. Specifically, it is al leged that if left unrestricted, competition will result in firms destroying one another until every industry, and perhaps the entire economy, is dominated by one or a few firms. But the most important influ ence of the dog-eat-dog view of competition is in its moral per spective. It projects and implies a view of competition as malicious, degraded and corrupt, and by ex tension, since competition is the motive power of a capitalist econ omy, the same view of capitalism.

It is this view of competition as vicious, antisocial, destructive be havior that is a significant factor in the willingness of politicians, the courts, and the people gener ally to forcibly modify competitive 1974 DOG-EAT-DOG COMPETITION 615 action through government law. And the same implicit view of the immoral nature of competition has served to undermine the, willing ness and ability of those who would defend capitalism. The sub ject of dog-eat-dog competition therefore is worthy of serious attention. A Valid Concept of Competition: First Step The businessman is most likely to complain of dog-eat-dog compe tition when the process of compe tition seems to be reducing his profits and perhaps threatening the survival of his business;. He feels himself attacked by his rivals in the market because their activ ity is in fact having the effect of damaging his economic welfare. It seems to him that the compet ing businesses are in the position of dogs fighting over the same scrap of meat and like dogs, in order for one of them to be free to eat or enjoy the trade in peace, he will have to kill off the others.

This is the spectre that the con cept of dog-eat-dog competition calls up: two or more parties each of which must destroy the others in order to survive. It is in fact a totally invalid view of competition. However, to prove that the dog eat-dog view of competition is in valid, it is first necessary to es tablish a valid concept of competition as a standard for evaluation. As a first step in that direction, everyone's concept or idea. of com petition will have the following as an essential, if implicit, element: the activity of two or more parties trying to acquire a value which only one can have.! For the mean ing of value here and in the re mainder of this paper, I follow Ayn Rand's definition, "that which one acts to gain and! or keep."2 There are a number of aspects to this approach to competition that need to be explicitly identi fied and emphasized. First, com petition is a kind of activity or action (as distinguished from the usual economic approach that de scribes "pure competition" as a kind of condition or state of real ity). Second, there cannot be com petition where there is only one party or participant. A solitary individual or firm would have no body to compete w'ith. Third, and most important, competition is an activity that arises only when the value pursued can only be had by ! When I say "everyone," I exclude only modern economists whose concept of u pure competition" is the opposite of this; Le., under "pure competition" there is no pursuit of values which only one can have.

2 Ayn Rand, The Virtue of Selfishness, (New York: The New American Library, 1964), p. 5. It is not possible to do more than mention here the overwhelming sig nificance that this concept of value has for the science of economics.

616 THE FREEMAN October one, when the acquisition of that value by one of the competitors necessarily excludes everyone else from its possession. 3 Viewed in this way, "competi tion" is a very broad concept cov ering a tremendously wide and disparate range of activities. How ever, this is entirely consistent with the way the term is used in reality, for "competition" is not restricted in its application to eco nomics and business. It has been the habitual neglect of this very fact and the treatment of compe tition as if its meaning were lim ited to the business world that has been a major source of error on this subject. The economists' pure ly competitive view of competition could never have been accepted if any attempt had been made to in tegrate it with the other forms of competition. Therefore it is worth while reviewing some of the al ternative uses of "competition" in connection with the definition ad vocated here.

Some Applications of "CompetitIon II Perhaps the most widely used alternative application is to games. In any game, the value pursued is "winning," the meaning of win ning being defined by the rules of 3 I believe I am indebted to George Reisman for this point in my approach to competition. the game. What makes the activity of a game competitive is that normally there can only be one winner. (Games are in a class by themselves as far as competition is concerned because of the arti ficial context, established by the rules, in which the competition takes place. We shall return to this shortly.) The concept "competition" is also used in connection with the activity of a political campaign. One aspect of a political campaign which makes it a type of compe tition is that not both parties to the campaign can be elected. If both McGovern and Nixon could have become President at the same time, the election campaign would not have been competition, and ob viously the nature of the entire proceeding would have been rad ically altered. And we can also talk about the competition of two men for the love of the same wom an. Again, it is competition in part because in our society, she can only marry one of them. In a dif ferent society, where a woman could have two or more husbands, it would not necessarily be com petition.

In the competition of the busi ness world, the common value pur sued by two or more firms is the customer's dollar. Two businesses are in competition with one an other when their relationship is 1974 DOG-EAT-DOG COMPETITION 617 such that the same customer in pursuit of some specific economic value could potentially spend his money with both of them. What makes their relationship compet itive is that what is potential for both can only be actualized for one, i.e., the potential customer can actually spend a given dollar only once. It is this pursuit of the customer's dollar that gives rise to all the business activity that is commonly regarded as competi tive: cutting prices, improving quality, offering better services, giving guarantees, running sales, advertising, providing attractive surroundings, etc. It is this type of activity that characterizes an entire capitalist economy from top to bottom and it is specific con crete actions of this kind that are subsumed under the concept of competition as it is applied to the business world.

A Valid Concept of Competition: Second Step There is something very impor tant that all these concrete actions have in common. They all involve the creation and offering of values. A lower price is a value to a cus tomer and so is a better product. Pleasant surroundings, good serv ice, guarantees, are all values which the business offers as the means of competing. (Advertising is the way that businesses make the public aware that the values they offer are available.) If compe tition is the activity of two or more parties trying to acquire a value which only one can have, the specific activity involved is mak ing values available, offering val ues, creating values, putting val ues on display. It is this value centered activity that is the con tent of "competition," the type of actions that are actually subsumed under the concept. That the value pursued can only be had by one sets the general context; that the method of pursuit is the offer of other values gives the specific meaning.

That the content of competition is making values available is true of every form of real world com petition, not just business competi tion. The competition of a political campaign is putting values on dis play in the form of personal ap pearances by the candidate and of fering values in the' form of cam paign promises and position papers. People vote for the candi date they think has the most val ues to offer. Two lovers trying to win the same girl do so by display ing the values of character and personality they have that they hope she will fall in love with. All competition is essentially a pro value activity, in some way di rected at announcing, creating, displaying or offering values.

618 THE FREEMAN October Competition in Games The only exception to this is the competition that occurs in games. It is an exception by virtue of the fact that the rules of the game normally carry the activity in volved entirely outside the context of normal human interaction. In a game, the specific form that com petitive action takes is entirely de fined by the rules of the game and can be anything the rules pre scribe. The rules of the game are in turn limited by the fact that the purpose of the game is to amuse and entertain the participants or spectators or both. But apart from that specific purpose, and as far as normal human relations are con cerned, the rules of the game are arbitrary. Outside the context of the game, there is no rational basis for the furious dispute we see con cerning the movement of a .leather ball over the hundred yards of a football field. In the real world, to smash yourself head first into the body of a stranger is assault and battery. On a football field, it may be blocking or tackling and is part of the competitive activity de fined by the rules. Similar exam ples could be drawn from almost any game.

The reason that a game's com petition need not take the form of offering values is that the playing of the game itself presupposes the voluntary agreement that is the raison d' etre for the offer of val ues. In the absence of force, any kind of human interaction re quires the consent of all parties, and values are offered in order to secure that consent. This is the root in reality of the fact that real world competition takes the form of offering values. But since the players of a game have already established the context of volun tary consent by agreeing to play, the interaction that takes place within the game need not require any further agreement and hence no further offering of values. By contrast, in the real world, there is no set of rules spelled out in ad vance and consequently most con tinuing human relationships de pend on a continuing offer and ac ceptance of values.

Competition versus the Use of Physical Force Competition in the real world does not include as a kind of activ ity the destruction or theft of val ues. Consequently, it does not in clude the use of physical force or violence or any derivatives there of. The use of physical force is al ways essentially anti-value, being inevitably directed at either the destruction or confiscation of someone's life, liberty or property. This is true whether the force is used criminally, in initiation, or properly, in retaliation. Whether 1974 DOG-EAT-DOG COMPETITION 619 he is an innocent victim or a hunted criminal, the recipient of force always experiences it as an attack on his values. It is the es sentially anti-value nature of force that explains the reason for its existence, Le., if it were not di rected against somebody's values, the force would not be necessary. There is another sense in which the retaliatory use of force by the victim against the criminal is pro value, for the victim uses force to preserve and maintain values that are rightfully his. However, the anti-value basis of the efficacy of force can still be seen in the fact that the intended victim maintains his values only by threatening or destroying the life, liberty or pro perty of the criminal, as does the government when it acts as the victim's surrogate. There is noth ing competitive about the use of physical force. 4 Thus, all the activities associ ated with "Watergate" are not considered a normal part of the competitive process of the past political campaign. Nor would it be considered competition if one political candidate had his oppo nent assassinated. And if one of a 4 This discussion of the use of physical force is much indebted to the writings of Ayn Rand. See especially For The New Intellectual (New York: Random House, 1961), pp. 164-66, and Capitalism: The Unknown Ideal (New York: The New American Library, Inc., 1966), pp. 39-41 and 299-300.

woman's suitors should throw acid in the face of a competitor to dis figure him, that would not be a competitive process of wooing her love. Contrary to a leading eco nomic principles text, war is not a form of competition. 5 It fulfills the condition of the general con text for competitive activity in that the value sought, victory, can only be reached by one of the parties. But war is essentially anti-value, destructive of values, the key to success being the extent of the destruction that can be in flicted or threatened against the enemy. As such, in terms of the fundamental meaning and signif icance of the activity involved, war is the opposite of competition. Nor would it be considered part of the competitive process in the business world for a businessman to dynamite his competitor's plant or to murder the manager of a competing firm. Competition in business always takes place-by means of the creation and offering of economic values in trade or ex change. It does not include any activity that involves the initia tion of physical force, since such activity contradicts the basic na ture and motive power of compe tition. Consequently, the suing of 5 Armen A. Alchian and William R.

Allen, University Economics, third edi tion (Belmont, California: Wadsworth Publishing Company, Inc., 1972), pp. 11-12.

620 THE FREEMAN October a superior firm by an inferior un der the antitrust laws, very pop ular today,6 is not competition either. Economic competition should be defined as the activity of two or more firms pursuing the same customers' dollars by of fering the highest values in ex change. Three Implications of Dog-Eat-Dog Competition Now, having established a valid concept of competition, we are in a position to critically evaluate the view of competition as "dog eat-dog." That label is intended to draw a parallel between the ac tivity of dogs fighting over a piece of meat and businesses competing for customers and to suggest that there is no essential difference be tween the two cases. It is true that if one dog gets the meat, that necessarily means the other dog or dogs cannot have it. To that extent, and to that extent only, there is a parallel between the general contexts in which compe tition and a dog fight may take place. However, that general con text is not the primary or essen tial issue. As we have seen, war and competition have that much in common. More important are the things suggested by the dog6 See Business Week, "Is John Sher man's Antitrust Obsolete 1", March 23, 1974, p. 54.

eat-dog view of competition which in fact are not true of any real world competitive relationship. There are in fact three such im plications of the dog-eat-dog view. First: Obsessive Concern with Other Firms The first thing suggested by the dog-eat-dog view is that the pri mary focus of attention of com peting firms is on each other, that each firm directs all its actions at the other firms in the industry. Of the three implications of "dog eat-dog," this is the only one that is true even of dogs. If two dogs are fighting over a piece of meat, each dog must be primarily con cerned with the other dog and di rect all its actions at the other dog in order to win the fight. This is not the case in business. Compet ing businesses are not engaged in a fight, there normally is no win ner at all, and the primary focus of attention and direction of ac tion is not at the other firms. This is not to say that firms in compe tition with one another do not have to be concerned with what each other is doing, as they cer tainly do. But the primary meth od,. the a,ction of competition, is in the creation and offering of eco nomic values, more concretely, in the production and sale of goods and services. And consequently, the primary activity and focus of 1974 DOG-EAT-DOG COMPETITION 621 concern of a business firm must be on the production and sale of its own goods.

Concern with what other firms are doing is a side issue. It comes up and is relevant only in so far as it may affect the firm's ability to sell its own goods. It is mean ingless in fact for one firm to be concerned with another apart from that specific issue. Since compet ing firms are not engaged in a fight, in any direct physical con tact, the only impact they can have on one another is through each other's sales. It is because of that impact that firms do have to be aware of changes in the quality of the competition's product, their prices, services, advertising cam paigns, etc., not as an end in itself, but as relevant information for the firm's determination of its own quality, price, advertising, etc. But rationally, the firm's primary fo cus of concern must be on its own productive activity, not on what the cornpetition is doing. The way the firm competes is through the offering of values. A firm or an entrepreneur obsessed with what the competition is doing, as sug gested by "dog-eat-dog," would have no values to offer.

Second: Formalized Theft The second thing suggested by the dog-eat-dog view is the idea that competition is the process of one party struggling to take some thing away from someone else, a kind of formalized theft. This is not true even of two dogs fighting over a piece of meat. Since the meat does not belong to either of the dogs, the winner cannot be said to have taken it away from the loser. However, it has signifi cantly greater plausibility with dogs than with human beings, since the concepts of individual rights and property do not apply to dogs. With human beings and business competition, the custom er's dollar pursued is the property of the customer until he spends it. No businessman can have any prior claim on the customer's money, and consequently he has had nothing taken away from him if that customer or all customers choose to spend their money with his competitors. Even if a business has a cus tomer of long standing that it has come to count and rely on, that does not change the fact that in a free society aU-men are free agents and can belong to no other man.

If that long-standing customer changes his mind and starts to patronize a competitor, nothing has been taken away from the business that loses the customer in any fundamental sense. The complaints in such a case arise from a. refusal to acknowledge or recognize that the customer did 622 THE FREEMAN October not belong to the business, the business did not own the customer, the customer was not the property of the business in the first place. Competition is not a process of businesses trying to take values away from one another but rather a process of creating values and offering them for exchange on the market. Third: Destruction or Elimination of Competing firms The third and by far the most important implication of the dog eat-dog view is that the goal of competing firms is the destruction of one another, that success in the market place means the elimination of the competition. Again, such a view is not true even of dogs.

When two dogs fight over a scrap of meat, the success of one does not depend on the death of the other; it depends only on winning the fight. However, even this view of success in the dog world is not ap plicable to economic competition. The concept of a "winner" in the dog-eat-dog sense has no relevance for competing firms. The obvious reason is that virtually all real world markets will support mote than one firm. There may be some plausibility in calling the firm with the largest share of the mar ket the temporary winner, but "winner" in this context does not mean the exclusion of everyone else from the prize as it does for the two dogs. While in each spe cific case, a dollar spent with one firm cannot also be spent with an other, one sale or one customer is not the condition of success or failure. The normal condition is that most of the firms in the mar ket can continue to survive and prosper and make profits over the long run with a reasonably effi cient performance. The success of one does not depend on the de struction of anyone else, but rather on the quality of the firm's own productive efforts.

The primary goal of the firm is not the destruction of other firms but the acquisition of the custo mer's dollar, the maximization of profits. The primary means to that goal is production of the best pro duct possible at the lowest possible price. If other firms are driven out of business in the process of pur suing that goal, it is normally en tirely incidental. The goal was not the destruction of other firms, but the maximization of profits. New firms are constantly opening for business and failing, not because competing firms set out to destroy them, but simply because they could not match the competition's quality and/or price at a cost which would allow them to make profits. Cases do occur where one firm cuts its price expecting to drive 1974 DOG-EAT-DOG COMPETITION 623 some competitors from the mar ket, pick up their customers, and increase its own business and profits. I am not speaking here of predatory price cutting, which is another anticapitalist myth, but of the case where one firm is gen uinely more efficient than others and can continue to make profits at prices that drive other businesses into bankruptcy. Again, the focus of the price-cutting firm's concern is not on driving other firms out of business, but on increasing the size of its own market. The elimi nation of the other firms is inci dental. The businesses being driv en from the market under such circumstances may complain that it is "dog-eat-dog" or "cutthroat competition," but that is not its basic motive or purpose.

Dog-Eat-Dog Competition in the Real World Is it possible for the conditions implied by "dog-eat-dog" to exist in the real world? Is it possible for there to be more firms in a market than the market can sup port so that the survival of some does depend on the elimination of others? Yes, it is possible. It can come about in essentially two al ternative ways. First, a highly profitable new and/or growing in dustry may attract so many firms that everyone ends up making losses. The classic example is the railroads in the I.9th century. However, such a situation repre sents a serious error in business judgment about the potential long run profits in the industry, and we should expect it to be rare in the free market. In the case of the railroads, they were overbuilt in the pursuit of government sub sidies and land grants, not as the result of private errors in the pur suit of private profits.

The second alternative is that an industry which is not overbuilt to begin with may suffer a change in market conditions, most likely a decrease in demand, which results in all or most of the firms taking losses. The decrease in demand can occur for two reasons: (1) a shift in demand away from this product to something else, or (2) a general decrease in demand as a symptom of a recession or depression. In ei ther case, the consequence may be too many firms in the industry for existing market conditions. These are the conditions under which the cry of "dog-eat-dog com petition" is most likely to be heard. The implication of 'the cry is that the process of competition itself is destroying the firms in the in dustry; and if we interpret com petition as only the offer of values, then there is a sense in which competition is to blame. The pro blem is simply that too large a quantity of goods (values) is being 624 THE FREEMAN October offered on the market, as we shaH see.

But competition, aggressive competi tion, is not just the pro cess of churning out goods. It is the pursuit of the customer's dol lar by offering the highest val ues in exchange. In that context, firms may lose money as the result of competition if another firm or firms consistently offer higher val ues and attract most of the cus tomers. But under the dog-eat-dog conditions described above, all or most of the firms are losing money and none of them is doing well. Their losses, therefore, cannot be. the result of unusually aggressive competition because the firm ini tiating such competition, offering the higher values and attracting the customers, should be making good profits. No, the firms are losing money not because competi tion is abnormally intense, but be cause of the Law of Demand. Dog-Eat-Dog versus the Law of Demand The Law of Demand says that larger quantities can only be sold at lower prices and smaller quanti ties can be sold for higher prices.

If all the firms in a market are losing money, the fundamental rea son must be that under existing demand conditions, the total quan tity the firms want to sell can only be sold at a price below costs. Obviously, this is a situation that can not continue. No firm can go on indefinitely producing at a loss. Eventually the least efficient firms will leave the industry and when they do this will reduce the total quantity to be sold on the market. The smaller quantity in turn can be sold for a higher price, and this process will continue until the firms remaining in the market can make profits. The crucial point for our purposes is that it is not conl petition that causes losses or drives firms from the market under such conditions, but the relation be tween the demand for the product and the cost conditions facing the firms. This last point is the basis for the answer to the charge that dog eat-dog competition results in monopolization. When existing firms are being driven out of a market under the circumstances described above, it is because of the conditions that exist in that market. Firms will stop leaving when those conditions change, and it is the process of firms leaving that is the means to changing those conditions, i.e., reducing the quantity sold and raising price.

The cause of the problem is not in the competition, and there is noth ing about the nature of competi tion that inevitably leads to mo nopolization. The only way that monopoly can result from competi1974 DOG-EAT-DOG COMPETITION 625 tion is if one firm can outcompete everyone else in the market, offer ing higher values than any other firm can match. Such a monopoly is very rare in the open market and represents a significant achieve ment. It is also clearly to the in terest of the market's customers. Summary and Conclusion Concerning Economic Competition The fundamental means by which economic competition proceeds in the real world is the offer of eco nomic values, placing goods and services f or sale on the mar keto The concept of dog-eat-dog com petition implies that competition is characterized by a paranoid obsession with what other firms are doing and proceeds through formalized theft and the destruc tion of other firms. As such, dog eat-dog competition has no con nection with competition as it actually exists in the business world or with any other form of competition.

Moreover, from the broadest perspective, the dog-eat-dog view implies that competition is a pro cess of destroying values; other firms, other firms' customers, other firms' goods. Blowing up a competitor's plant and murdering the manager would be entirely consistent with what is suggested by dog-eat-dog. As such, this view of competitive action is not merely mistaken, it is the reverse of competition as it is actually car ried on in reality. The heart of competition is making values available, and any concept that suggests the opposite is viciously antisocial and destruc tive. This is not an abstract char acterization but a factual indict ment. It can be seen in the conse quences of the policies listed in the first paragraph of this article, pol icies that have flowed from the dog-eat-dog concept. The Inter state Commerce Commission was created in part to prevent dog-eat dog competition among the rail roads and in the process has vir tually destroyed them. The Nation al Recovery Administration, set up to prevent dog-eat-dog competi tion among American businesses generally during the Great De pression, would have turned the United States of America into a fascist state. And the Robinson Patman Act, designed to prevent some firms from harming or de stroying others through low prices, has in practice operated as an attack on all price competition. Such are the consequences of a false con cept.

It is bitterly ironic that the de structiveness which the dog-eat dog concept attributes to real world competition has in fact been the consequence of the policies 626 THE FREEMAN October generated by the dog-eat-dog con cept. It becomes mind-staggering when one grasps that this is only a minor instance of a process which operates on a global scale. It is a process whereby a charge against capitalism generates gov ernment action which creates the evil alleged in the charge (e.g., the The Nature of Monopoly charge that capitalism is eco nomically unstable has led to gov ernment policies which have de stabilized the economy). This per verse sequence of events can be found to have resulted from virtu ally all the attacks that have been directed against the capitalist sys ~m. ~ IDEAS ON LIBERTY A SERIOUS CHARGE made against the free market by its friends is ... that in an unhampered market the individual would not be truly free but would be imposed upon by monopolies of various kinds and degrees. This charge appears in the preamble to one piece of interventionist legislation after another. Thus, the worker is said to need special protection because of the monopoly power of the employer. The farmer must be protected against monopolies on both sides of his market. Certain kinds of business firms must be protected against certain other kinds. Certain price decisions must be influenced by government because of the monopoly power of the firms involved. And on and on it goes. Clearly, if private monopoly is il}deed this ubiquitous, a presumption is established in favor of a substantial role for government.

In my opinion, however ... positions of monopoly power tend to be short-lived and relatively ineffective, except as they receive the positive assistance and protection of government. Or phrased another way, government in the United States has done far more to promote monopoly than to promote and permit competition. BENJAMIN A. ROGGE, "Is Economic Freedom Possible?"