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Tuesday, May 4, 2021

What Marianne Williamson Gets Wrong About Competition

Free market competition is incredibly collaborative.

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Marianne Williamson is no stranger to progressive politics. Known as Oprah Winfrey’s spiritual advisor, she has written extensively about her views and even ran for the Democratic nomination for the 2020 presidential election. She advocates a wealth tax, universal healthcare, free public college, and a host of other policies that would make President Biden look like a conservative by comparison.

But if her recent tweets are anything to go by, even these policies are not enough for Williamson. Indeed, she recently remarked that competition itself is problematic in the economy, and that “we need a fundamental disruption of our economic status quo.”

At first glance, the problems with competition seem obvious. We can accomplish far more working with each other than working against each other, many would contend, and an economic system based on win-lose interactions will only perpetuate antagonism and inequality. In order to “solve humanity’s greatest challenges,” we need to set aside our tribal allegiances and foster trust, cooperation, and a common aim.

But while eliminating competition may sound reasonable, we should be careful before rushing to tear down the system. As G. K. Chesterton said, “don’t ever take a fence down until you know the reason it was put up.”

Indeed, the main problem with Williamson’s tweet is that she doesn’t seem to understand why competition is part of the “economic status quo” in the first place. More specifically, she doesn’t seem to understand the kind of competition she’s talking about.

Two Kinds of Competition

Humans engage in two kinds of competition, according to the great economist Ludwig von Mises. The first kind of competition is a straightforward win-lose fight. In his classic book Human Action, Mises called this “biological competition,” because it springs from the inherent conflicts of interest that arise in nature.

“The means of subsistence are scarce,” Mises wrote. “The antagonism between an animal starving to death and another that snatches the food away from it is implacable.”

In human affairs, biological competition can be seen in crimes like mugging, wars over resources, and other predatory and parasitic behaviors.

The other kind of competition is what Mises called “social competition,” which he defines as “the striving of individuals to attain the most favorable position in the system of social cooperation.” This kind of friendly competition is more complex, because it has a cordial element to it. As Mises wrote, “[social] competition is emulation between people who want to surpass one another. It is not a fight… those who fail are not annihilated; they are removed to a place in the social system that is more modest, but more adequate to their achievements than that which they had planned to attain.”

While biological competition is certainly at odds with collaboration, social competition can still exist within a collaborative framework. This is an important distinction that Williamson fails to make. She talks as if social competition is at odds with collaboration, when in reality the two can easily coexist.

In fact, not only can social competition coexist with cooperation, it is often the very means we use to collaborate.

For example, consider the hit Netflix series The Queen’s Gambit, which is the story of an orphaned chess prodigy named Beth Harmon who rises to the top of the chess world. Though the people in the chess community have many conflicting interests, they all want to find out who is the best chess player in the world, and they do this by setting up a tournament.

Tournaments are, by their nature, competitive. There are winners and losers. And yet, the whole thing is also very much collaborative. The players all voluntarily participate and abide by the rules. And by competing fairly, they all cooperate with one another to achieve their mutual goal of determining who among them is the best.

Winning the tournament is certainly the goal, but it’s only an intermediate goal. Discovering the best player is the ultimate goal, and their interests are all aligned in that regard. Thus, social competition is the means they use to collaborate. As Mises puts it, they are “competing in cooperation and cooperating in competition.”

The Role of Competition in the Market

Markets function in very much the same way. All guacamole lovers, for example, have a shared interest in finding out the best way to produce the wondrous foodstuff. In a society with economic freedom, the way we do this is by fostering a friendly competition.

First, we let different companies try their best to efficiently produce guacamole that meets people’s needs. Since we don’t know which process is the best at the start, we need multiple companies to try using different materials and production methods to see which one works best. Even though no single person is planning it, companies voluntarily develop and test lots of alternatives, and this allows us to get a good sense of what our options are.

The next step happens when consumers trade with the companies. This is akin to the evaluation process in decision making. Only consumers know best what they want, and their buying decisions will reflect their appraisal of each company’s performance.

Finally, the companies calculate their profit or loss. If they were profitable, that is a sign that they were efficient, because the value they produced exceeded the value they consumed. If they take a loss, it means their production methods were wasteful, because the resource inputs were more valuable than the outputs.

As profitable companies expand and losing companies contract, a selection process takes place, where efficient production methods outcompete inefficient ones. This is essentially how innovation works. Different groups try different ways of doing things, and the best ones “win.”

Most importantly, the consumers win, because efficiency leads to better quality and lower prices.

Thus, just as the players in a chess tournament collaborate to achieve their ultimate goal of discovering the best player, producers and consumers in the market work together to discover the best production processes. In fact, it is precisely this friendly competition that fosters technological development and improved production methods.

But notably, this collaborative discovery process wouldn’t be possible if a monopoly (such as the government) controlled the entire industry. It only works when a plurality of companies are free to compete in an open market that welcomes new ideas.

On top of the innovation and progress it brings, the beauty of a free market is that it allows people to form mutually beneficial trading relationships in all sorts of creative ways, weaving humanity into a global network of harmonious cooperation. As Leonard Read points out in his classic essay I, Pencil, the market process connects people from all cultures, languages, and locations, fostering a global collaborative effort to make life better.

What About the Losers?

Aside from signaling which production methods are most efficient, profits and losses also systematically shift resources away from losing companies and toward profitable companies. For some, this is one of the downsides of competition. After all, people lose jobs when companies take losses. And how is it fair or helpful when hard-working people lose out to competitors who have an unfair advantage (in size, technology, location etc.)?

This is an understandable view, but it paints a one-sided picture that omits the economic reality. Under free market conditions (and that’s an important qualifier), the only reason a company takes a loss is because they are not using resources as well as their “winning” competitors. In other words, wealth is being depleted because of the company’s existence. And quite frankly, it’s not fair or helpful to ask consumers to subsidize enterprises that are fundamentally wasteful.

We want people to have jobs, of course, but those jobs need to be productive. So rather than perpetuating wasteful practices by propping up losing businesses, it would be far better for the resources of those companies to be repurposed for more profitable (i.e. efficient) uses. This is effectively what competition facilitates. The “losers” are not annihilated or reduced to destitution. Rather, they are simply prompted to rededicate their land, labor, and capital toward processes that are more suitable for advancing consumer well-being. Losses do not indicate defeat. They merely indicate that a change of course is in order.

Joseph Schumpeter called this change of course “creative destruction,” and it is a crucial part of economic progress. Henry Hazlitt explains it well in Economics in One Lesson.

“It is just as necessary to the health of a dynamic economy that dying industries be allowed to die as that growing industries be allowed to grow. The first process is essential to the second. It is as foolish to try to preserve obsolescent industries as to try to preserve obsolescent methods of production: this is often, in fact, merely two ways of describing the same thing. Improved methods of production must constantly supplant obsolete methods, if both old needs and new wants are to be filled by better commodities and better means.”

Governments Are Inherently Anti-Collaborative

In response to her call for a “fundamental disruption” of the economic status quo, Williamson was asked to elaborate on what she meant by that. Her reply is very telling.

Ironically, the policies she advocates are very anti-collaborative. For example, “regulate industry and financial institutions” presumably means she wants to interfere with people trying to collaborate on industrial or financial matters. “Anti-trust” presumably means she wants to stop big companies from collaborating with smaller companies by acquiring them. (And besides, isn’t the whole point of anti-trust policy to foster more competition?)

“Higher minimum wage” presumably means she would outlaw mutually beneficial, collaborative arrangements between workers and employers. And then there’s a litany of other proposals which all come down to forced participation in a one-size-fits-all system.

In fact, force is really the common denominator of all her anti-collaborative policy positions. But far from being a coincidence, that’s actually the whole point. To put it simply, the opposite of collaboration isn’t social competition. It’s coercion.

When governments forcibly interfere with economic activity, they inevitably disrupt the collaborative efforts that emerge spontaneously in the market. People are eager to work together through all kinds of trade, but they can only do so to the extent that they are free from restrictions and mandates.

Government initiatives are not “what we do together.” They are the things that are forced on us by those who would substitute coercion for cooperation.

But free markets are the epitome of that genuine cooperation which Williamson claims to espouse. Far from hurting us, free market competition has been the single biggest driver of innovation and prosperity the world has ever known. And it has fostered more collaboration and harmony among humans than anything else in history.

  • Patrick Carroll is the Managing Editor at the Foundation for Economic Education.