The classical notion of competition revisited

We compare and analyse two different conceptions of market competition: the walrasian notion of perfect competition and the Classical notion of free competition: while the former may be described as an equilibrium state in which atomistic agents treat prices parametrically, the latter is a situation in which agents, endowed by market power, fix prices strategically. We show that price undercutting or outbidding are the typical phenomena that, for the Classical authors, may be observed in a market characterized by free competition. We investigate some problematic aspects of the neoclassical notion of perfect competition and we reconstruct the Classical theory of free competition, as developed, in particular, by Adam Smith and Karl Marx, in the light of the modern notion of mixed strategies equilibria.Classical Economics, Competition, Adam Smith, Karl Marx, mixed strategies

David Ricardo on natural and market prices

This is an entry produced for the Elgar Companion to David Ricardo, edited by Heinz D. Kurz and Neri Salvadori. Cheltenham, UK and Northampton, MA, USA: Edward Elgar, forthcoming

David Ricardo on natural and market prices

This is an entry produced for the Elgar Companion to David Ricardo, edited by Heinz D. Kurz and Neri Salvadori. Cheltenham, UK and Northampton, MA, USA: Edward Elgar, forthcoming

Old lady charm: a comment

I start from Nicola Giocoli’s acute rational reconstruction of current US antitrust debate which shows that there really is no shortage of plausible explanations to the Chicago persistent appeal puzzle. Each explanation, taken in isolation, is, at best, only partial. In my view, the persistent appeal of Chicago antitrust owes much to the enduring grip of the equilibrium end-state notion of competition within top US Economics Departments and to the (alleged) resilience of market competition, absent entry/exit barriers, in the face of Type II Errors committed by antitrust Agencies

Economics in the mirror of the financial crisis

The structure of the Chapter is as follows. In Section 2 I discuss some of the factors that may have played a role in causing the crisis and emphasise that supporters of different economic theories will assign different weights to each factor in their analyses. As a consequence, suggested economic policies are highly sensitive to the economic theory employed in evaluating the set of causes. In Section 3 I seek to defend economists from the common charge that their inability to foresee the crisis is a clear sign of the lack of scientific status of their discipline. In my view, the main liability of mainstream economics lies elsewhere, in its excessive trust on the self-equilibrating mechanisms of free-market economies. Mainstream macroeconomists, enamoured of the efficient financial markets hypothesis, may have been too hasty in dismissing the financial instability hypothesis proposed by Keynes and developed by Minsky. Section 4 briefly outlines Keynes’s and Minsky’s contribution on this subject while Section 5 concludes

Edward H. Chamberlin (1899 − 1967)

This is an entry produced for the Handbook of the History of Economic Analysis, edited by Gilbert Faccarello and Heinz D. Kurz. Cheltenham, UK and Northampton, MA, USA: Edward Elgar, forthcoming

From endogenous growth to stationary state: The world economy in the mathematical formulation of the Ricardian system

We analyze international trade in a Pasinetti-Ricardo growth model in the world economy scenario in which several small trading countries coexist and international commodity prices are determined by the interplay of supply and demand amongst them. We demonstrate that all the trading countries eventually reach the stationary state, though this process is not monotonic and the dynamics of capital and population may actually push some countries toward the stationary state and others away from it. We also use our model to assess an argument which Malthus employed in the second edition (1803) of An Essay on the Principle of Population to support a policy of agricultural protectionism

The Malthus versus Ricardo 1815 Corn Laws Controversy: An appraisal

The paper proposes a rational reconstruction of the arguments developed by Malthus and Ricardo in their 1815 essays, Grounds of an Opinion and An Essay on Profits, to repudiate and endorse a policy of free corn trade, respectively. Malthus envisaged defence and opulence as two mutually alternative options and, if required to make a choice, he had no doubt in choosing the former. By contrast, Ricardo excluded any alternative between defence and opulence: trade does note give a sustainable weapon to potential enemies of Great Britain whereas trade-driven opulence may give Great Britain greater means to wage a war

The classical notion of competition revisited

We compare and analyse two different conceptions of market competition: the walrasian notion of perfect competition and the Classical notion of free competition: while the former may be described as an equilibrium state in which atomistic agents treat prices parametrically, the latter is a situation in which agents, endowed by market power, fix prices strategically. We show that price undercutting or outbidding are the typical phenomena that, for the Classical authors, may be observed in a market characterized by free competition. We investigate some problematic aspects of the neoclassical notion of perfect competition and we reconstruct the Classical theory of free competition, as developed, in particular, by Adam Smith and Karl Marx, in the light of the modern notion of mixed strategies equilibria

The classical notion of competition revisited

The paper seeks to fill a lacuna within Classical economics concerning the process of market price determination in a short-period equilibrium. To this aim, first we distinguish the Classical notion of free competition from the Walrasian notion of perfect competition and we argue that the latter is beset by some theoretical difficulties alien to the former. Second, we reconstruct in some detail Smith and Marx’s views concerning market price determination and we show that Marx’s extensive use of metaphors and numerical examples foreshadows the modern taxonomy of buyers’ market, sellers’ market and mixed strategy equilibrium in the capacity space of a standard Bertrand duopoly model. Finally, we highlight similarities and differences between the Classical notion of competition and contemporary game-theoretic oligopoly model