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Sunday, October 20, 2019

How Economic Competition Is Unlike a Darwinian Struggle

Unlike a Darwinian struggle in which others are your enemies, capitalism’s competition in production makes producers much “fitter” friends to consumers.

Photo by Blake Wisz on Unsplash

Those who promote the idea that capitalism is a dog-eat-dog system start their story in a world with a fixed, or “given” amount of resources. That makes sense if we are talking about non-human species because they do not expand the resources available from nature for others of their kind. Consequently, competition is only on the consumption side, where what one gains, the other loses. However, to assume a world of “given” resources is massively misleading if we are considering people.

Voluntary Competition in Production

The reason is that in a capitalist society, competition in production precedes competition in consumption, and competition in production is the key. In capitalism, we must first produce for others to earn the resources necessary to finance our desires for consumption. Since in a free market that process must be voluntary, as Murray Rothbard put it,

One man gains only through serving another…through the peaceful cooperation of the market…through the development of the division of labor and capital investment.

Markets force people to first compete in production, to seek ways to benefit others as indirect ways to benefit themselves, unlike those who seek to consume at others’ expense. As Sheldon Richman wrote,

the competition that goes on in the marketplace is not, for the most part, competition in consumption, but rather competition in production…we compete to consume by competing to produce.

That is, in markets, people compete and prosper by increasing the value of goods and services produced by more than they receive in return, especially through new ideas and innovation. And if I can produce a “new and improved” widget for $10 and sell it for $11 to someone who values it at $12, others receive more in value at the same time I profit from the exchange.

As George Reisman described the result,

Man, by virtue of his possession of reason, can increase the supply of everything on which his survival and well-being depend. Thus…economic competition under capitalism is a competition in who can increase the supply of things the most…offering the best and most economical products their minds can devise…in the positive creation of new and additional wealth.

Another way to put it is that in markets, competition in production rewards those who best cooperate with consumers. Individuals compete to consume by expanding production and wealth for others.

Cooperation Is Rewarded

In the market’s competition in production, anyone can offer to cooperate at acceptable, stated terms. The process rewards those most able to meet consumer desires, whoever the consumers may be. Competition overcomes restrictions against those who would willingly offer to cooperate at better terms, opening up improved opportunities for those who would prefer to deal with them if given the chance. It favors those better able to serve others.

In addition, markets provide a special premium reward for producing what “the masses” want and are willing to pay, so that such “benefactors” gain greatly because they have provided great benefits for others, not at others’ expense. Capitalism also obviates the need for those who would serve others to get some economic planner’s permission to produce.In that way, competition in production is, in fact, the primary uplifting force for the poor, not a means of trampling them underfoot.

Capitalism also obviates the need for those who would serve others to get some economic planner’s permission to produce. Because all it takes to acquire the resources to produce in capitalism is to convince sufficient investors that a project is likely to benefit others sufficiently, gauged by potential profits, it vastly increases the range of ideas and approaches that can be tested in the marketplace, which heightens the intensity of competition in production to the benefit of all consumers.

Further, the competition in production under capitalism has created a cornucopia of investment, wealth, and technology that has made us all more productive, not to mention creating all the medical miracles that now routinely save otherwise “unfit” people.

Anti-Darwinistic Competition

To recognize the importance of capitalism’s competition in production to meet others’ desires, one has only to look at government impositions of price ceilings (like rent control) and regulatory restrictions, which override voluntary market prices and arrangements, to see how they undermine producers’ incentives to provide what consumers want.

As William Graham Sumner recognized,

Liberty means the security given to each man that…he shall dispose of the produce exclusively as he chooses. It is impossible to know whence any definition or criterion of justice can be derived, if it is not deduced from this view of things; or if it is not the definition of justice that each shall enjoy the fruit of his own labor and self-denial.

However, the dog-eat-dog accusers of capitalism would deny people that hard-earned fruit. Therefore, the solution is in liberty and private property as the only way to

leave each man to run his career in life in his own way, only guaranteeing to him that whatever he does in the way of industry, economy, prudence, sound judgment, etc., shall redound to his own welfare and shall not be diverted to someone else’s benefit.

There is a vast abyss between the story the dog-eat-dog crowd tells us about capitalism and the fact that it, in fact, has no peer when it comes to providing more abundant, and therefore cheaper, goods and services for all. Virtually all survive better, making capitalism’s competition in production dramatically anti-Darwinian. In fact, unlike a Darwinian struggle in which others (in their sole role as consumers) are your enemies, capitalism’s competition in production makes producers much “fitter” friends to consumers.

  • Gary M. Galles is a Professor of Economics at Pepperdine University and a member of the Foundation for Economic Education faculty network.

    In addition to his new book, Pathways to Policy Failures (2020), his books include Lines of Liberty (2016), Faulty Premises, Faulty Policies (2014), and Apostle of Peace (2013).