How Much Competition; B. Summers

What, then, is the meaning of business competition? Well, what do businessmen do? The answer, of course, is they try to earn profits. And the only way businessmen can earn profits is by cutting costs of production, since there is very little they can do about the selling prices of their products. To see this, first consider costs of production. The businessman 1976 HOW MUCH COMPETITION? 243 can choose from a wide variety of known production processes; he may even develop a new process. Clearly, there is much the busi nessman can do to try to cut his costs by making more efficient use of his men, rnaterials, and ma chines. Once his products are finished, however, there is little the busi nessman can do except· name an asking price and wait. If people buy his product, fine. If they don't - if they prefer. the. products of his competitors - he has little re course other than to lower his asking price, perhaps by offering rebates.

And who are his competitors? They are the manufacturers of identical products, similar prod ucts and, in fact, all the other producers who bid for the con sumer's dollar. Each businessman must also take into account the potential competitors who stand ready to enter his field the mo ment his profits start to look good. Thus, General Motors competes with Ford, Ch~ysler, American Motors, foreign auto makers, the manufacturers of motorcycles, bicycles, buses, trains, and airplanes, the potential manufacturers of these items, and everyone else who hopes to win the consumer's ap proval. The folly in attempting to count competitors is now apparent: In a. free market, all businessmen are competitors. Free market competition bene fits everyone. It encourages busi nessmen to introduce new prod ucts and make efficient use of resources. It yields profits to those who give consumers what they want and losses to those who don't.

Profits enable efficient producers to expand production, while losses stimulate inefficient producers to ward greater efficiency. Too much competition? That is like asking if there is too much efficiency and not enough waste. Too little competition? Only when government licenses, franchises, and other regulations prevent peo ple from entering a given field. How much competition should there be? Let all people be free to compete in a market economy, an economy that offers a fair field, with no privileges or favors available from the government. ~ IDEAS ON LIBERTY Ludwig von Mises 'rHERE IS in the market economy no other means of acqUIrIng and preserving wealth than by supplying the masses in the best and cheapest way with all the goods they ask for.