The Freeman 1972 - The Ludwig von Mises Institute

518 THE FREEMAN Septemberrium" situation, that is a situationwhere all things have alreadybeen fully adjusted to one another.All activities, all decisions havebeen fully coordinated by the marketso that there are no disappointments.No participant in theeconomy discovers that he couldhave done something .better. Noparticipant in the economy discoversthat he has made plans todo something which it turns outhe cannot do.In this model of the perfectlycompetitive economy, there wouldin fact be no competition in thesense in which the layman, or thebusinessman, understands theterm. The term "competition" tothe businessman, the layman,means an activity designed to outstripone's competitors, a rivalrousactivity designed to get ahead ofone's colleagues, or those withwhom one is competing. In a worldof equilibrium, a world of "perfectcompetition," there would beno room for further rivalry. Therewould be no reason to attempt to .do something·better than is currentlybeing done. There would,in fact, be no competition in theeveryday sense of the term.When we describe the laissezfaireeconomy as competitive, wemean something quite different.We mean an economy in whichthere is complete freedom of entry;if anyone believes that hecan produce something that canserve consumers' wants morefaithfully, he can try to do it. Ifanyone believes that the currentproducers are producing at a pricewhich is too high, then he is freeto try to produce and sell at alower price. This is what competitionmeans. It does not mean thatthe market has already attainedthe "equilibrium" situation,which goes under the very embarrassingtechnical name of "perfectlycompetitive economy."Non-Price CompetitionNow, economists and others understandgenerally that competitionmeans price competition: offeringto sell at a lower price thanyour competitors are asking, oroffering to buy at a higher pricethan your competitors are bidding.Entrepreneurs will offerhigher prices than others are offeringfor scarce labor. They willoffer to sell a product at lowerprices than the competing store isasking. This is what price competitionmeans. This is the mostobvious form in which competitionmanifests itself.However, we must rememberthat there is another kind of competition,sometimes called "nonpricecompetition," sometimescalled "quality competition." Competitiontakes the form not onlyof producing the identical product