.
Wu 2004-12/27 read 4 times157 times.
Western economics believes that perfect competition can optimize the allocation of resources, and take this as a frame of reference to judge the allocation efficiency of other types of market structures and demonstrate the rationality of free market economy. Therefore, in a sense, the theory of perfect competition is a cornerstone of western economics. The question to be asked now is: Is this cornerstone really solid? Is there nothing to reflect on the theory of perfect competition?
First, irrational theory of perfect competition theory of perfect competition
It is unreasonable because western economics ignores reality in order to fabricate the myth of perfect competition and optimal efficiency. Specifically, for the following reasons:
1. Being in a completely competitive market, it is a helpless choice.
The demand curve faced by perfectly competitive manufacturers is a parallel line, and it is the receiver of price. They can't manipulate prices, but can only make normal profits in the long-term equilibrium. Monopoly manufacturers, monopoly competitors and oligopolistic manufacturers are not. They are faced with a demand curve that inclines downward to the right. The phenomenon that the demand curve inclines to the lower right shows that incomplete competitors can control the price to a certain extent and obtain excess profits. The descriptions of perfect competition, monopoly competition, oligopoly competition and monopoly in western economics are puzzling: since whether prices can be controlled is the premise of obtaining high profits and manufacturers aim at maximizing profits, why do so many manufacturers stay in perfectly competitive industries for a long time and accept only normal profits? The theory of perfect competition has encountered "internal injuries" that cannot be healed: if the manufacturer is an economic rational person and is unwilling to become a perfect competitive manufacturer, he always hopes to control the price and obtain excess profits by entering the ranks of monopoly competition, oligopoly and monopoly; If the manufacturer is an economic rational person and still stays in a perfectly competitive industry, there are only two possibilities. Either the theory of perfect competition is irrational, or it is rational for manufacturers to choose perfect competition industries. If the choice of manufacturers is determined to be rational, what kind of rationality is it? Obviously, it is helpless rationality. Although economics is a research choice, in real economic life, people's choice range is limited, even unique. Many people are puzzled that migrant workers choose to work in humble small coal mines and mines, and think that their rationality is "desperate rationality". In fact, for migrant workers who can only provide homogeneous products with physical strength, it is the best choice to earn money to support their families and risk their lives to work in small coal mines and small mines under the extremely fierce competition in the labor market. Someone once asked Sichuan farmers, "Why do they still raise pigs when the price of pigs has dropped?" The answer is: "If you don't raise pigs, why are you idle?" [1] This shows that "raising pigs" is the only choice. Therefore, the only reason for being in a perfectly competitive industry is rational choice without choice.
Who would have no choice? In a word, there are a large number of ordinary people in a weak position. Specifically, it includes the following manufacturers: (1) can only provide goods with a very small price difference; (2) The commodities provided are in the mature period and decline period in the product life cycle; (3) Industry concentration is extremely low. Why do only the weak stay in perfectly competitive industries? Because the weak are often unable to provide differentiated products and reduce costs through innovation. Perfect competition is the competition for the weak to get the right to live, and imperfect competition is the competition for the strong to get more profits.
2. Didn't pay attention to the fact that perfectly competitive manufacturers often suffer from price fluctuations.
Under the condition of so-called perfect competition, the demand curve faced by a single manufacturer is a parallel line, so as far as a single manufacturer is concerned, increasing production will not lead to price changes. As far as perfectly competitive industries are concerned, as long as the market capacity is not unlimited, increasing the output of each manufacturer will inevitably lead to price fluctuations. The influence of price fluctuation on manufacturers in perfectly competitive industries is often devastating, because perfectly competitive manufacturers have only one means of competition-price war.
The reason why price wars often occur in a perfectly competitive market is not only because the capacity of the perfectly competitive market is not infinite, but also because there are a large number of weak people in the perfectly competitive market. The weak are full of perfectly competitive markets that can advance and retreat freely, which shows that once the price of a perfectly competitive market rises for one reason or another, it will attract a large number of weak people in other perfectly competitive markets to flood into the perfectly competitive market, making the supply of this market show an infinite expansion trend. The contradiction between infinitely expanding supply and limited demand will inevitably lead to large price fluctuations. Therefore, the fact that a large number of manufacturers live in a perfectly competitive environment constitutes the internal reason for the frequent price changes in a perfectly competitive market.
3. Perfect competition is the rest of advanced competition.
With the rapid development of science and technology, the acceleration of globalization, the diversification of customer demand and the shortening of product design cycle and product life cycle, the competitive advantage of enterprises is difficult to last, and it is necessary to move quickly to the next advantage through a series of short-term actions and accumulate lasting advantages. Davini believes that "as long as there is a winning method-history has proved that this method must exist-all enterprises have the motivation to find it. Perfect competition is not so much a real situation as a fiction, because companies will avoid it with super-competitive behavior. " [2] Therefore, perfect competition is only the surplus of super-competitive competition. Under the condition of perfect competition, the acquisition and processing of information is free, and manufacturers do not have to work hard to improve the efficiency of production and operation, and competition becomes a frozen state. In the long-term equilibrium, the perfect competitors who produce homogeneous products reach the lowest average cost at the same time, thus losing the motivation to improve production and management efficiency. In order to fabricate the myth of complete competition in resource allocation efficiency, western economics secretly sacrificed the improvement of production and management efficiency. In fact, in the reality of a completely competitive market, manufacturers have never given up their efforts to improve production and operating efficiency, and always strive to produce at a lower cost. In reality, perfectly competitive manufacturers are willing to make efforts for this, because they know that personal proprietary knowledge such as experience can never be obtained for free, and these proprietary knowledge is essential to reduce costs. In addition, product homogeneity does not mean that there is no possibility of improvement. Take agricultural products as an example to analyze this problem. There are at least two ways to change the quality of the same agricultural product. One is to change the combination of production factors, such as applying farm manure instead of pesticides when producing green food; The second is to use transgenic technology to improve seeds to change products. Although this method is completely impossible for competitors, high-tech biological companies can do it. In short, whether it is to reduce costs or change product quality, it has left a space for completely competitive manufacturers to play "rationality".
4. Competition is a multidimensional concept.
Competition is a multi-dimensional concept, whether from the content of the competition or from the way of the competition. The theory of perfect competition only demonstrates the optimal efficiency of resource allocation in a perfectly competitive market from the perspective of "price", and takes it as a reference system to evaluate the efficiency of monopoly competition, monopoly and oligopoly, as well as a standard of competition degree. Constructing the theory in this way will inevitably lead to problems.
First, the enterprise theory lacks internal logical consistency. It is reasonable to evaluate the efficiency of monopoly with perfect competition as the reference frame, because it produces homogeneous products. It is irrelevant to judge the efficiency of imperfect competition by taking perfect competition as the frame of reference and the standard of competition degree, because monopoly competition and oligopoly manufacturers produce differentiated products.
The second is generalization. According to Harold demsetz, the possible scope of competition is output, price, quality and innovation, so it is inevitable to measure the intensity of competition only by the dimension of homogeneous products provided by manufacturers. If these four dimensions are taken into account, it is a mixture of competition, and it is impossible to give a general standard to measure the intensity of competition. Because the degree of competition related to one activity is related to the degree of competition related to another activity, and this correlation is usually negatively related. For example, limiting the output of invented products and raising their prices can encourage innovation. In addition, some people divide competition into product competition, value chain competition, resource and ability competition and strategic thinking competition. Dividing competition into the above four levels enriches people's views on competition and shows that the development of competition theory must be combined with management science.
Third, the complex relationship between market structure and resource allocation efficiency cannot be explained. In the theory of industrial organization, Harvard school thinks that industrial concentration has obvious influence on enterprise performance. Bain counted 42 industries in the United States 1936- 1940 and divided them into two groups. One group is 22 industries, and the market concentration of the eight largest enterprises in each industry is more than 70%. The other group is 20 industries, and the market concentration of the eight largest enterprises in each industry is less than 70%. Bain found that the average profit rate of industries with high concentration is 12. 1%, while that of industries with low concentration is only 6.9%. Harvard school draws the following conclusion: market concentration will lead to the inefficiency of resource allocation. In order to realize the effective allocation of resources, we must limit mergers, oppose monopoly and collusion, and maintain effective competition. On the contrary, Chicago School, which rose in 1960s, thought that market concentration might be the result of high performance rather than the cause. Brozen denied the simple relationship between concentration and profit, and pointed out that the industries studied by Bain may be unbalanced, so the profits of Bain's so-called high-profit industries will decline in the future, while the profits of low-profit industries will increase in the future. He also believes that it is not necessarily anti-competitive, and high profits are not necessarily the result of anti-competitive pricing, but may be the result of high efficiency. Therefore, the Chicago School adheres to the liberal tradition and opposes government intervention. Braudel, the second generation leader of the French historical yearbook school, believes that the so-called perfect competition market has existed since ancient times, but paradoxically, the existence of monopoly organizations has promoted the expansion of the market.
I didn't notice the efforts made by perfectly competitive manufacturers to get rid of price control. As long as people are economically rational, they will try to control prices, and completely competitive manufacturers are no exception. The theory of perfect competition does not see the efforts of manufacturers to control prices, and regards prices as exogenous. In fact, in order to reduce the pain of price fluctuation, perfectly competitive manufacturers are intentionally or unintentionally controlling prices. Facing the agricultural products market with fluctuating prices, Americans invented the Chicago agricultural products futures market. Faced with the ever-changing price of live pigs, Sichuan farmers have also launched their own struggle. When the pig price falls, it will "hang a pig", feed less concentrated feed and not be busy with slaughter; When the price of pigs rises, feed more concentrated feed, fatten quickly and slaughter as soon as possible. The efforts of Sichuan farmers to control prices not only modified the cobweb model of pigs, because the fluctuation of pig prices was more gentle, but also reflected the basic premise of western economics-economic rational people.
In short, western economics, which prides itself on rationality, becomes irrational because it ignores the fact that the weak are in a perfect competitive environment.
Second, the static theory of perfect competition.
The theory of perfect competition only describes under what conditions it can be called a perfectly competitive manufacturer and how manufacturers can make profits in the short and long term, but it fails to reveal its evolution history.
It is a very complicated problem how the perfectly competitive manufacturers come into being, and only a preliminary explanation can be made. From "monopoly to competition" should be a path of completely competitive manufacturers' production. The product life cycle theory divides the product life cycle into four stages: infancy, stereotypes, maturity and decline. When a manufacturer produces a new product through technological innovation, there is only one in the market at this time, then the manufacturer monopolizes an industry. The patent protection period is out of date, technology overflows, and other manufacturers follow suit, so there is competition. If other manufacturers improve their products in the follow-up process and produce differences, monopolistic competition will occur. If the product is not improved and completely homogenized (such as the promotion of new varieties of agricultural products), it will evolve into a completely competitive market structure.
How did perfectly competitive manufacturers evolve? Companies in perfect competition will not compete perfectly forever. The theory of perfect competition points out that it is possible for a perfectly competitive manufacturer to obtain excess profits in a short time. The fact of obtaining excess profits provides capital support for perfectly competitive manufacturers to withdraw from perfectly competitive industries; Efforts to jump out of price control and seek more profits have provided internal motivation for them to get out of completely competitive industries. Therefore, the high profits in the perfectly competitive market in a short period of time provide financial support for entering the imperfect competitive market, and then become an imperfect competitive manufacturer. Jumping out of the perfect competitive market and entering the imperfect competitive market is a path; From competition to monopoly is another path, which is mainly realized through capital concentration and aggregation.
Under the condition of knowledge economy, there is a third path, that is, manufacturers in perfectly competitive industries can beat top companies with mature technology and make themselves monopoly manufacturers. Christensen [7] believes that famous companies died of the most popular management "ism"-always following customers, paying full attention to existing big customers and improving products according to customer needs. Paying attention to key customers is of course the main part of the company's strategy, but it is not all. Once disruptive technologies appear, companies that only focus on big customers will soon disappear.
Finally, there is another way for unknown manufacturers to beat famous big companies, and that is to create brand-new technologies. If analog technology is replaced by digital technology, the whole technical path will be fundamentally changed. This is a "new way", which is usually not something that completely competitive manufacturers can do.
Third, the inherent defect of the theory of perfect competition-irrationality.
Western economics has a basic premise-economic rational person, that is, consumers pursue utility maximization and manufacturers pursue profit maximization. In the firm theory of western economics, it is discussed how monopoly, oligopoly and monopoly competitors determine the market price in the process of pursuing profit maximization, but when it comes to perfectly competitive firms, the price is exogenous, not the result of the firm's pursuit of profit maximization. Therefore, in this sense, the theory of perfect competition is irrational, and its existence undermines the integrity of western economics.
How does western economics face and solve the problem of exogenous price in perfectly competitive market?
Walras was aware of this problem when he founded the general equilibrium theory, but he avoided talking about it and only explained how the prices of different commodities influenced each other under the condition of perfect competition. The general equilibrium theory implies a basic premise: the actual price is determined by the general equilibrium price. Therefore, the price adjustment mechanism is: when the supply exceeds the demand, the price drops; When demand exceeds supply, prices will rise.
Since it is a problem, it can't be bypassed. The general equilibrium theory encounters a paradox here-from demonstrating the superiority of the market to the feasibility of the planned economy. Since we are competing at a given price, how can the price change? If it changes, who's in charge? In order to solve this problem, Walras conceived an "auctioneer" with an overall view, whose function was to find a balanced price for clearing the market. Newton didn't know how celestial bodies moved at first, so he conceived the "first pusher". Walras didn't know how the actual price was determined, so he imagined an "auctioneer". After God's first push, celestial bodies move according to Newton's laws. Under the condition of "auctioneer" in Walras, a competitive market presents the following functions: At zero, the auctioneer in Walras calls out some price vectors. All participants use these prices to determine the demand and supply of their spot and futures. The auctioneer checks the total excess demand vector and adjusts the price according to certain rules, assuming that the price of goods in excess demand increases and the price of goods in excess supply decreases. This process will continue until an equilibrium price is found. At this point, all transactions, including futures trading contracts, should be completed. The economy moves with time, and all parties fulfill the agreed contract. The problem is not that Newton and Walras are strikingly similar, but that the setting of "auctioneer" in Walras leads to the conclusion of denying the market economy. As long as it acts as an auctioneer's Planning Committee, Langer's model of competitive socialism will be established, which proves that the planned economy is feasible.
In order to repair the inherent defects brought by the theory of perfect competition to western economics and solve the sequelae brought by Walras's "auctioneer", economists have made unremitting efforts [8]. In recent decades, economists have developed the so-called "nuclear" theory, which studies how different political parties form specific "alliances" to maximize their respective utility. Compared with the general equilibrium theory, this is an improvement-because it shows how everyone's maximum exchange behavior spontaneously determines the exchange ratio between items. However, this theory still cannot correctly explain how competitive prices are formed in reality. It only shows that when the number of parties in economic activities tends to infinity, the optimal exchange rate between individuals tends to general equilibrium relative prices. It does not consider the exchange with money as the medium; Ignoring the uncertainty of economic parties in the future when making decisions; Nor does it consider the influence of perishable products on the output and price decision of enterprises.
Aiming at the weakness of the perfect competition model, Zuo Dapei, an economist in China, put forward his own view that the price formation of agricultural products market and stock market which are closest to the perfect competition market in reality is also the product of individual rational behavior, but in these markets, individual rational behavior is interactive in determining prices. Even if a single enterprise and buyer can't decide the price independently, they can still make expectations about the market price and decide at what price to buy or sell. The sum of these behaviors determines the price in a competitive market. He also believes that in the realistic competitive market, producers are well aware that they are facing an uncertain product market. But what producers must determine is: to determine a completely certain output. In this case, the perishable nature of the product is decisive. For the manufacturers of perishable products, the most advantageous way is to produce as few products as possible at a given price, and only produce the output that can be sold for sure. For non-perishable products, the balance between supply and demand is not a necessary condition. Because in the short term when the output cannot be changed, even if the supply exceeds the demand, it can be reserved for the next period. Therefore, enterprises can adjust the price through inventory without considering whether the current product is equal to the current demand.
Therefore, Zuo Dapei came to a conclusion different from the orthodox theory of perfect competition:
1. The price of the product has great fluctuation. In the orthodox theory of perfect competition, the equilibrium price fluctuates only because of the change of production cost or demand. In his analysis, inventory adjustment affects price fluctuation.
2. The enterprise's expectation of future price will strongly affect the output and price of products, and this expectation depends on the current sales volume and inventory changes.
3. Non-market exchange factors have great influence on product price decision. Expectation can strongly affect the current output and price, but expectation depends not only on the current sales and inventory of products, but also on social politics and emergencies, as well as rumors and lies. All these factors will affect the price, but economic analysis has left no room for them to play a role.
Mr. Zuo Dapei gave a close-to-reality explanation of the formation of the price mechanism under the condition of perfect competition in reality, which undoubtedly promoted the theory of perfect competition, but it is a great pity that he failed to derive a more general model. In addition, information economics also tells us that the search cost of information itself is also an influencing factor that causes homogenization and price difference, which is also ignored by him.
Soros put forward an example of financial alchemy. The core of this new paradigm is the theory of "reflexivity". Reflexivity refers to the two-way relationship between the feelings, expectations or understanding of participants in economic activities and the events and situations they participate in. This two-way connection can be described as follows: on the one hand, participants always try to understand and foresee the future situation of events; On the other hand, these predictions and expectations will affect and change the initial possible state of the development process and events when put into practice. Call participants' efforts to understand future events "cognitive function"; The influence of participants on the real world is called "participation function". Therefore, reflexivity can also be described as a pair of circular functions: cognitive function: y=f(x) participation function: x=φ(y), that is, y=f[φ(y)]x=φ[f(x)].
It is considered that this theory can be used as a more general paradigm to analyze the formation of perfectly competitive price, and the perfectly competitive price (P) is regarded as a function of cognition and participation: p=f(x, y).
In a word, economics is a practical science, which must be close to reality, and the theory of perfect competition should not be an exception.