The Perfect As The Enemy Of The Good

Lynne Kiesling

While we’re linking to PFF posts, I particularly think that more people should consider the ideas that Ray raises in this post on the perils of a naive acceptance of the perfect competition model.

The point is the damage done by perfect competition models to the regulatory psyche. There is an unstated supposition that you need multiple firms, all being price-takers, for “competition” to be deemed a success. …

The lament that there might be only two, three or four competitors in communications markets should not be. It should be a celebration of exactly what network industries yield. The competition that matters here is the Schumpeterian competition for platform dominance over time, not the short-term static competion that neo-classical economic analysis can capture.

Perfect competition only exists on the blackboard. Get over it. Think of it as a theoretical benchmark, not necessarily the desirable endpoint of a linear progression from monopoly to competition. Real, dynamic, Schumpeterian competition is nonlinear, and makes the static concept of perfect competition less relevant to real human action.

One thought on “The Perfect As The Enemy Of The Good

  1. It is probably worth noting that “perfect” regulation, designed to achieve the same results which would have been achieved by “perfect” competition, is also a “blackboard” concept.

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