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Quotation of the Day…

… is from pages 38-39 of the 2016 Mercatus Center re-issue of my late colleague Don Lavoie’s excellent 1985 volume National Economic Planning: What Is Left? (original emphasis):

What makes an industry competitive is the degree to which entry of new rivals into that industry is politically restricted or free. It is the threat of competition from other (perhaps only potential) firms or individuals that makes an industry competitive.

The extent of advantage that comes from rivalrous competition is not proportional to the number of competitors, as is often assumed by researchers in industrial organization. Cost advantages gained from larger scale production, purchasing, or sales will often spawn very large firms. Thus the relevant “rivals” upon whose contention the competitive process depends should not be thought of as individuals but, rather as “islands of planning,” whose size is itself a result of competitive forces.

Moreover, competition should not be thought to occur only within an industry. An industry can only be defined by cutting an arbitrary line through a continuum of similar firms producing comparable products. All contenders for profit in the market process compete for the consumer’s direct or indirect expenditures of money.