The Science of Demand (16) - Unofficial Translation of Steven Cheung's 经济解释 - 科学说需求

Section 3.  The Nature of Competition

In Robinson Crusoe’s desert island, a one-man economy, competition does not exist. Certainly, there may be other animals competing with Crusoe for food, yet there is no competition among people. Competition in economics refers to competition among people – all economic postulates are designed for human, and the majority of behavior to be explained is competition among people.

In Crusoe’s one-man economy, there are free goods as well as economic goods. In striving for more of a certain economic good, Crusoe has to forgo certain option. In order to eat one more fish, he has to take less rest; to chop more wood for warmth, the option forgone is less apple plantation; to consume more wheat this year, the option forgone is having less next year. Indeed, even on a desert island, Crusoe has to face the reality of insufficient supply. With the existence of economic goods, an option has to be forgone. Just like all of us, he has to make a choice, too. The difference is: in Crusoe’s economy, competition among people does not exist.

In a one-man economy that has no competition, economics is indeed trivial. We can apply economic theory to explain Crusoe’s behavior, and a complete set of explanation, if simply stated, only requires two to three hours – even in-depth analysis will take no more than two to three days. Let’s imagine, in Crusoe’s one-man economy, there are neither markets, prices, currencies, inflation, unemployment, nor laws, police, politics, not to mention arms, middlemen, contracts, institutions, etc. Without all this, economics cannot be any difficult.

It is true that the complications and difficulty of economics are entirely due to having one extra person in Crusoe’s economy. A world with two or more people becomes a society – this is the most clear-cut definition of “society”. Economics becomes interesting due to the existence of “society”. We can also look at it this way: more than 99% of the complexity of economics is due to us not living in a Crusoe’s one-man economy, but in a multi-person society.

Let’s follow the progression of this reasoning. An economic good is “more is better than less”. In a society, a person wants more of a good, and other people likewise want more of that good. With demand outstripping supply, competition is thus inevitable. The definition of competition refers to the demand for an economic good comprising the demand of more than one person. Such examples are aplenty in the society in which we live. Undeniably, free goods – such as fresh air – do exist in the real world, though there are less and less of them.

It is not that easy to find non-competitive economic goods. In principle, in a society, an economic good is not necessarily subject to competition, though examples are few and far between. More than sixty years ago, I was studying in Hong Kong’s Wanchai College. When our fellow students went to see a movie, they were anxious to collect a brochure distributed by the movie theatre about the storyline of the movie – commonly called “movie plot”. Old (outdated) “movie plots”, having numerous students striving to keep to themselves, were scarce and all had a price. For those less readily available, several Hong Kong dollars was required to exchange. In those days, such an amount was my pocket money for a whole week. Under competition, old “movie plots” became economic goods. After a few years, the enthusiasm for collecting “movie plots” suddenly died down, with the students growing weary of them and eventually abandoning them. The only exception was a student surnamed Lee who was so obsessed with the “movie plots” that he kept on collecting. Therefore, for this eccentric student, though there was no competition for old “movie plots”, it was an economic good (more is better than less). This was a rare example of an economic good having no competition in a society. Times have now changed, and movie theatres in Hong Kong no longer print nor distribute “movie plots”. I have not seen student Lee for fifty years, and have no idea how he managed his whopping piles of “movie plots”.

In a society, there is competition for almost every economic good. There is therefore competition every day. Every one of us competes day and night. Having accustomed to it since childhood, we may not be conscious of its omnipresence. The breakfast that we eat is won by competition. When one person eats more for breakfast, someone else has got to eat less. In competition, one “gains” while the other “loses”. This is the case for breakfast, for lunch, for the bed we sleep in. The same is true for catching a bus, studying in school, sunbathing on the beach, watching television at home, etc.

It is difficult to find non-competitive behavior among people in the society. Strictly speaking, “no competition” hardly exists in economics. Certain sub-par economic textbooks say that competition does not exist under a monopoly or a patent. However, monopoly and patent merely suppress one kind of competition, while at the same time increasing competition of another kind. For instance, people will have to compete in order to get a monopoly or a patent; and under a monopolized (or patented) market, people will devise similar products or substitutes to compete for profit.

In a society that has no market, competition will also keep emerging one after another, though the forms of competition are different. The law of the jungle is competition, so are power struggle, back-door transaction, ranking by seniority, hierarchical privileges, etc. The message is clear: whenever more than one person demand for the same economic good, competition inevitably exists.