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Quotation of the Day…

… is from page 154 of Gerald P. O’Driscoll, Jr.’s 1986 article “Competition as a Process: A Law and Economics Perspective,” which is chapter 7 of Economics as a Process: Essays in the New Institutional Economics (Richard N. Langlois, ed., 1986):

What recommends competition, then, is the information revealed and the goals achieved, which could not have been known or attained by any other method.  The theory of competition as a process focuses on the ability of markets to accomplish what is strictly unpredictable before the process takes place.

The wholly different results of competition constitute an element of surprise not only for economic agents but also for economic theorists.  Just as competition inevitably disappoints at least some of the expectations of buyers and sellers, so too it must falsify some of the predictions of theorists about the characteristics of competitive markets.  Market participants are engaged in a learning process, in which relevant data are discovered.  Similarly, however, theorists can discover which practices are competitive only by observing not by postulating them.