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Quotation of the Day…

… is from page 96 of F. A. Hayek’s 1948 collection, Individualism and Economic Order; specifically, it’s from Hayek’s important 1946 article “The Meaning of Competition“:

The peculiar nature of the assumptions from which the theory of competitive equilibrium starts stands out very clearly if we ask which of the activities that are commonly designated by the verb “to compete” would still be possible if those conditions were all satisfied.  Perhaps it is worth recalling that, according to Dr. Johnson, competition is “the action of endeavouring to gain what another endeavours to gain at the same time.”  Now, how many of the devices adopted in ordinary life to that end would still be open to a seller in a market in which so-called “perfect competition” prevails?  I believe that the answer is exactly none.  Advertising, undercutting, and improving (“differentiating”) the goods or services produced are all excluded by definition – “perfect” competition means indeed the absence of all competitive activities.

In short, economists’ so-called “theory of perfect competition” is not at all or in any way a theory of competition.