Classical Vs Neoclassical Conceptions of Competition
ISSN 1791-3144 University of Macedonia Department of Economics Discussion Paper Series Classical vs. Neoclassical Conceptions of Competition Lefteris Tsoulfidis Discussion Paper No. 11/2011 Department of Economics, University of Macedonia, 156 Egnatia str, 540 06 Thessaloniki, Greece, Fax: + 30 (0) 2310 891292 http://econlab.uom.gr/econdep/ 1 Classical vs. Neoclassical Conceptions of Competition∗ By Lefteris Tsoulfidis Associate Professor, Department of Economics University of Macedonia 156 Egnatia Street, 540 06, Thessaloniki, Greece Tel. 2310 891-788, Fax 2310 891-786 Homepage: http://econlab.uom.gr/~lnt/ Abstract This article discusses two major conceptions of competition, the classical and the neoclassical. In the classical conception, competition is viewed as a dynamic rivalrous process of firms struggling with each other over the expansion of their market shares. This dynamic view of competition characterizes mainly the works of Smith, Ricardo, J.S. Mill and Marx; a similar view can be also found in the writings of Austrian economists and the business literature. By contrast, the neoclassical conception of competition is derived from the requirements of a theory geared towards static equilibrium and not from any historical observation of the way in which firms actually organize and compete with each other. Key Words: B12, B13, B14, L11 JEL Classification Codes: Classical Competition, Regulating Capital, Incremental Rate of Return, Rate of Profit, Perfect Competition. 1. Introduction This article contrasts the classical and the neoclassical theories of competition, starting with the classical one as this was developed in the writings of Smith, Ricardo, J.S. Mill and more explicitly analyzed in Marx’s Capital. The claim that this paper raises is that the classical conception of competition despite its realism was gradually replaced by the neoclassical one, according to which competition is an end state rather than a description of the way in which firms organize and actually compete with each other.
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