Many misconceptions about the nature of the free market system come from ignoring who ultimately benefits from the market process. That the significant number of those who would benefit most from market operations—consumers—also tend to harbor many of the antagonisms against the logically necessary features of the market highlights the unfortunate reality that most people still do not properly understand how their interests would could be served by the market mechanism. Thus, it is not surprising that records abound in modern history of ambitious politicians, statesmen and planners exploiting this widespread ignorance to advance utopian ends through eclectic and inherently contradictory policies that rational deliberation would could easily expose as illusory.

One of the widely criticized features of the market system is the concept of catalactic competition. Unsurprisingly, the notion of free competition within the market society is bound to attract the severest censures, given its incompatibility with most people’s ideological pre-possessions, such as enforced egalitarianism and “social justice”. This article offers a defense of catallactic competition as an inherent feature of the social order of the division of labor and private ownership of the means of production. Through praxeological reasoning, it will illustrate the hidden effects of potential disruptions to the competitive order.

Catalactic competition vs. Darwinian competition

It is important to first make a clear distinction between competition as understood in the domain of catalactics and competition as conceived in the Darwinian sense. Catalactic competition is an aspect of social cooperation in which male actors see themselves as outperforming fellow participants in serving consumers as a means to their own ends. It is not synonymous with the so-called “law of the jungle” or the Darwinian conception of the biological struggle for survival. As such, the use of combative terms or expressions such as “cut”, “conquest” or “crushing competitors” to describe the state of affairs in the field of catalactics are only misleading and consequently distract from serious deliberations on the subject. material. Put simply, catallactic competition prevents the initiation of force between market participants.

A series of competitions

There cannot be a market independent of the process of competition. Viewing the market as an ongoing process, rather than a steady state in which there is no action, allows us to better understand that competition is always ongoing within distinct economic categories—entrepreneurs, capitalists, resource owners, and consumers – as well as in their integrated functions. The market process is a series of competitive actions between various market participants acting to obtain limited means to help satisfy urgent wants. For example, entrepreneurs – using economic calculus – engage in their purchasing factors. They compete on the basis of the limit set by the anticipated prices of the marginal products. Because these resources are scarce and have alternative uses, they try to offer them away from other entrepreneurs who are evaluating and similarly trying to obtain these resources for alternative production lines. Resource owners – by cooperating in this process – willingly offer their resources for sale to the highest bidder.

Also, consumers are not immune to competition in the market because the products they want most urgently are simultaneously wanted by other consumers in the market. Submarginal buyers become excluded from obtaining these goods and are directed to more capable buyers. Thus, purchasing and bargaining power become the determining factors in the competition of each consumer in the market.

Competitive order and monopoly

It is often said that competition precludes monopoly. But the concept of monopoly is often undefined. Monopoly is a concept with many connotations.

On the one hand, there is the connotation involving absolute control of access to a vital resource, where a single individual or a group of individuals, through the use of force, excludes its employment by other users, either in the service of personal interests or according to arbitrary judgments . This would be the case in an absolute dictatorship or a world-embracing socialist state where the Führer, the production czar or a ruling bureaucracy dictates the circumstances of the availability of these resources to other users. Regarding this connotation of monopoly, the above statement can be said to be true.

On the other hand, there is the connotation of monopoly which involves controlling access to certain quantities of a vital productive resource as a result of initial appropriation or voluntary exchange. This could happen through previous entrepreneurial vigilance, foresight and accurate anticipation of the future state of the market. This would lead to the subsequent charging of a “monopoly price” for the resource in question. Before the emergence of the “monopoly”, any other entrepreneur, in the performance of the purchase function, was free to compete in the purchase of the resource up to the maximum amount obtained for future production, however, they underestimated the potential importance of the resource in relation to future market conditions.

It is important to note that this type of monopoly does not prevent free entry into the industry in question, nor does it foreclose a market for potential substitutes for the monopoly good, so it is compatible with the competitive order. Like Mises in a nutshell put it in Human action: “It would be a serious blunder to infer from the antithesis between monopoly price and competitive price that monopoly price is the result of the absence of competition. There is always cutthroat competition in the market.” Moreover, any attempt to constrain the decisions of this “monopolist” entrepreneur into alternative actions, which – judged from his point of view – are unsatisfactory, becomes potentially disruptive of the competitive order.

Disruption of the competitive order

Given that the free market system is based on the cooperation and voluntary interactions of individuals acting to satisfy their desires, it follows logically that any instance of coercive action by individuals or groups of individuals designed to influence the actions of other individuals becomes potentially disruptive a competitive order that defines this system.

The most systematic threat to the competitive order is the wrong economic doctrine, which has increasingly gained greater acceptance in almost every country in the world today, and which has become the basis of policies that disrupt the mechanism of social cooperation—interventionism. Interventionism promotes the notion of compatibility between free market capitalism and violent state interventions in economic affairs. Interventionism is claimed to be a middle economic system between capitalism and socialism, i.e. a third economic system of economic organization. However, as Mises briefly remarks in his book The middle of the road leads to socialism,

Interventionism cannot be considered an economic system destined to remain. It is a method of transforming capitalism into socialism through a series of successive steps.

While ignoring the inevitable interdependence of economic phenomena, proponents of the doctrine of interventionism see the economy as a compartmentalized, loosely coupled system in which specific actions can be tailored to different “compartments” of the economy in the hope of achieving desired results. However, most policies advanced under interventionism almost always produce results that, judged from the point of view of their originators, are unsatisfactory. More precisely, policies aimed at suppressing competition end up affecting consumers whose needs would be better served in an unfettered market.

Arguments against competition were offered on the basis of the imperfections of competition which would cause more misery than if competition were suppressed. But, like Hayek put it in the book Individualism and the economic order,

… the evils which experience has shown to be the usual consequence of the suppression of competition are on a different plane from those which the imperfections of competition can cause.

For example, the use of tariffs to suppress foreign competition in a domestic market usually ends up raising the prices of locally produced goods, affecting labor productivity by shifting production from favorable to unfavorable areas, and encouraging entrenched cartelization and monopoly. on the domestic market.

The ultimate beneficiaries of free competition

It is in the interest of consumers – towards which every act of productive activity of the entrepreneur is directed – that the competitive order be preserved, because this would imply the possibility of a better satisfaction of desires by accessing more attractive opportunities in the future. If consumers are to satisfy various wants through the market mechanism, then they must realize that competition is an inherent feature of the market system and cannot be suppressed without affecting both their short-term and long-term interests.