Posts tagged with: competition

Blog author: rnothstine
posted by on Tuesday, July 29, 2008

The Summer issue of City Journal features a piece worth reading by Guy Sorman titled “Economics Does Not Lie.” The paper includes weighty arguments favoring a free market economic system and the author does a good job explaining the rationale of those who criticize a free economy. Sorman says:

If economics is finally a science, what, exactly, does it teach? With the help of Columbia University economist Pierre-André Chiappori, I have synthesized its findings into ten propositions. Almost all top economists—those who are recognized as such by their peers and who publish in the leading scientific journals—would endorse them (the exceptions are those like Joseph Stiglitz and Jeffrey Sachs, whose public pronouncements are more political than scientific). The more the public understands and embraces these propositions, the more prosperous the world will become.

These are the ten propositions put forward by Sorman:

1. The market economy is the most efficient of all economic systems.

2. Free trade helps economic development.

3. Good institutions help development. (governments & rule of law)

4. The best measure of a good economy is its growth.

5. Creative destruction is the engine of economic growth.

6. Monetary stability, too, is necessary for growth; inflation is always harmful.

7. Unemployment among unskilled workers is largely determined by how much labor costs.

8. While the welfare state is necessary in some form, it isn’t always effective.

9. The creation of complex financial markets has brought about economic progress.

10. Competition is usually desirable.

Sorman adds:

These ten propositions should guide all economic policymaking, and to an increasing degree they do, worldwide. Does this mean that we’ve reached an “end of history” in economics, to borrow a phrase made famous by Francis Fukuyama, by way of Hegel and Alexandre Kojève? In one sense, perhaps: economic science will never rediscover the virtues of hyperinflation or industrial nationalization. Some critics charge that economics is not a science in the way that, say, physics is—after all, economists can’t make precise predictions, as an exact science can. But this isn’t quite true: economists can predict that certain bad policies will lead necessarily to catastrophe. If economics, a human science, lacks the precision of physics, a natural one, it advances the same way—evolving from one theory to the next, each approximating a reality that eludes our complete grasp.

On a somewhat related note about economic policy, here is a review I wrote about the book Good Capitalism, Bad Capitalism and the Economics of Growth and Prosperity. The review appeared in the Fall 2007 issue of Religion and Liberty.

Railing against corporate dictatorship, delocator.net helps consumers find locally-owned cafes, bookstores, and movie theatres in their area — alternatives to the “invasion” of Starbucks, Borders, and their ilk. The site itself is actually quite an interesting capitalist idea in its freshness and creativity, and people certainly should eat or drink or shop where they are most comfortable. That’s the beauty of competition! And the kind of community-building that often takes place at familiar, time-tested, local shops is to be encouraged.

But to say local businesses possess some kind of moral magic simply by virtue of being family-owned and homey is preposterous. Such shops may be more ethically run in some ways, partially through close personal ties to the community and to fellow owners and employees. But this bespeaks the virtue of the management, not of the abstract institution of the local business itself (just as it indicates the poor character of the management of a corporate business, and not all of corporate business itself, when one falls into unethical dealings). Also, independent stores are often smaller, so they may provide fewer jobs to people in the community and supply fewer products to their customers. Neither of these are inherently good qualities for businesses to have.

In saying that independent, community-operated businesses “deserve your dime,” delocator.net forgets that consumers may have different preferences, needs, and reasons for choosing bigger stores, and that it is not immoral for them to do so. While it is true that corporate business is not inherently praiseworthy, neither are small businesses — but inherently good things can come out of both types of stores in different circumstances, even if ignoring the economic benefits of competition. Making books more widely available to average people is a good thing. Having a choice of coffee shops — for atmosphere, taste, cost, or convenience — is a good thing. Even facing more snack options at a bigger movie theater is, in its own sense, desirable.

If delocator fans don’t find these things desirable, they should by all means avoid them. But to limit personal choice and to condemn the multiplicity of options seems to defeat the principle of independence that claims to inform them in the first place.

Blog author: jballor
posted by on Thursday, January 26, 2006

If you’re like most Americans, the answer is probably “No.” Faced with loss of market share and declining revenues, Ford announced a restructuring plan that would cut nearly a quarter of its workforce and close 14 plants over the next six years. The moves are intended to bring the auto giant back to profitability by 2008.

What has caused the competitiveness of Ford to plummet? It’s part of the larger trend among American automakers. Ford’s “Way Forward” plan was preceded by GM’s flirtation with a “cloud of bankruptcy” and was followed by DaimlerChrysler’s announcement of layoffs (many of which would be in Germany).

NBC Nightly News featured a story on the U.S. auto industry’s woes on Tuesday night (Netcast available here). Patriotism is being replaced by pragmatism, says NBC’s Anne Thompson.

MSNBC’s Roland Jones writes, “Like its U.S. rival GM, Ford has struggled in recent years with a loss in U.S. market share to Asian rivals, a decline in sales of its large SUVs because of higher gasoline prices and a crippling healthcare bill and pension costs for its U.S. workforce and retirees.”
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Blog author: jspalink
posted by on Friday, January 13, 2006

Apologies for a second Apple-related post in a row, but I thought this example might prove to be a decent case-study of competition in the marketplace. One of the new products that Apple recently introduced was iWeb, a new program that makes it easy “to create websites and blogs — complete with podcasts, photos and movies — and get them online, fast.”

Why do I bring this up? The reason is that a small software company has been working on a similar program, Sandvox. “Sandvox makes website creation elegant, intuitive and fun.” Karelia Software released a public beta last week in response to rumors that Apple was releasing a program called iWeb so that people wouldn’t think that iWeb came first. This is not the first time that this has happened to Karelia. A similar conflict existed between Karelia’s Watson program, and Apple’s Sherlock.

So why do we care? While many people might shrink from the challenge of taking market share from a large corporation, Karelia has embraced the challenge as an opportunity to provide a better product to its users. From Karelia’s blog:

What Sandvox can offer is a compelling alternative to iWeb, just as Watson turned into an alternative to Sherlock 3; Path Finder is an alternative to Finder; NetNewsWire and a host of others are alternatives to Safari’s RSS reader; and Adium can replace iChat. As each of these offer solutions to the limitations provided by Apple’s software, so too will Sandvox.

…As we move forward past version 1.0, we will be able to further distinguish Sandvox from iWeb by focusing on features that our users demand that will never be a part of the iLife suite.

Here’s tipping a hat to a company that understands that competition exists not to stifle, but to bring out innovation; and for embracing that challenge to produce a better product.