Blog author: jsunde
Tuesday, December 31, 2013
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????????????????????????????????????In a recent piece for the Wall Street Journal, Emory economics professor Paul H. Rubin makes an interesting argument about the way economists tend to over-elevate and/or misconstrue the role of competition in the flourishing of markets.

“Competition plays a supporting role,” he argues, but “cooperation makes markets thrive”:

The way we use the term competition instead of cooperation fosters anti-market bias. “Competition” carries a negative connotation because it implies winners and losers, and our minds naturally feel sympathy for the losers. But cooperation evokes a positive response: It’s a win-win situation with no losers. And in fact the word competition doesn’t depict market activity as aptly as the word cooperation. The “competitive economy” would be better described as the “cooperative economy.”

Consider the most basic economic unit, the transaction. A transaction is cooperative because both parties gain from a voluntary exchange. There is competition in markets, but it’s actually competition for the right to cooperate. Firms must compete for the privilege of selling to consumers—for the right to cooperate with consumers. Workers compete for the right to cooperate with employers. Competition matters because it ensures that the most efficient players will gain the right to cooperate on the best terms available. But competition plays a supporting role, while cooperation makes markets thrive.

Cooperation isn’t just more important in the economic sphere—it’s also more common. We cooperate with everyone involved in making all the products we buy and sell, millions of people we’ll never know. We compete, on the other hand, with only a few individuals or firms. As economists say, in “pure competition”—a free-market model in which resources can flow to their most valuable use without government or other interference—competition doesn’t exist at all.

Further, and quite paradoxically, even our innovating alongside competitors has the potential to morph into certain forms of cooperation, whether through eventual mergers and acquisitions, participation and cross-pollination at industry associations and summits, mobility among workers from this firm to that, adoption of and modifications or improvements to a competitor’s prior invention, etc.

Microsoft and Apple have long been fierce competitors, for example, but one cannot observe the trajectory of their histories without also observing certain manifestations of collaboration along the way, whether directly or indirectly. Exchanges have taken place, back and forth and back again, with competition and cooperation overlapping in messy yet productive ways. In this aspect (and in plenty of others), competition can play a role well before and beyond merely “ensuring efficient players,” as Rubin puts it.*

But Rubin’s primary aim here is to improve the semantics of pro-market arguments and, in turn, align the popular imagination a bit closer to the way things actually work — in its politics/ideology/philosophy/what-have-you. Its a worthwhile effort, to be sure, but the need for such a perspective may be even more beneficial for the purposes of actually working, innovating, cooperating, and competing in the market.

As employees, do we view our role as collaborative, from the negotiating of our wage to the messier exchanges of skills, sweat, and capital of all colors? As managers, owners, and executives, do we view the power we’ve been given as an opportunity to further empower and unleash cooperation among those under our stewardship, and in the service of broader social/cultural/spiritual cohesion? As widget sellers or service providers, do we view our contributions to clients and customers as cooperative exchanges that, on net, contribute to the flourishing of society? As consumers, do we view our purchases in terms of exchange, rather than mere self-supporting consumption?

The fruitfulness of pro-market arguments would be greatly improved if cooperation were at the forefront of our thinking, but let us not forget, so would the prospects of the market itself.

*As long as we’re on the subject, “efficiency” is another feature of typical economist argumentation that could use some semantic embellishment. But alas, for another day.

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