Competition and Competitive Markets: Toward Improving the Discourse Roger B. Conover Azusa Pacific University Diverse values issues must be considered when evaluating competition as a social institution that structures economic interactions. Acts of economic competition have been interpreted by some as inherently exploitative, attempts by the strong to dominate the weak. Others see competition as an essential part of a fundamental process of improving the conditions and capabilities of the economic participants. Institutional arrangements are seen as social constructs designed to assure the success of the avarice of the strong, or as furthering both economic efficiency and prudence. Indeed, to some, the economic model of “Perfect Competition” is the epitome of absurdity. It is at once an oxymoronic description of a state that never has nor will exist, and of a society that, even if it were possible, would best be left uncreated. To others, it is the Holy Grail of social arrangements. Such opposing views result from different definitions of competition, different expectations for competition as a social organizing institution, and different values and objectives of the authors engaged in the discussion. The rhetorical conflict between theologians and economists has been particularly strident.1 Yet my experience has been that theologians and economists often talk past each other rather than with each other. The purpose of this paper is to engage in a 1
This paper specifically addresses the dialogue between Christian theologians and “mainstream” economists. Other
religious traditions are not discussed here, nor are other economic traditions, though the ideas expressed should be of
some use in such conversations as well.
1 discussion of competition from the perspective of one who is both a Christian and an economist in the hope that this work can contribute to an improved dialogue2. In this paper I present a framework of dimensions for understanding various definitions and analytical and evaluative perspectives on social interactions that have been called “competitive,” particularly as this competition pertains to economic relations. I do not attempt to propose (nor impose) a single definition or evaluative structure. I then use the framework to reflect on a number of examples of theological considerations of economic competition and its attendant principles. Using the framework outlined, it becomes clear that the rhetorical battles are often caused as much by different meaning given to the concepts of competition and competitive markets as by different values held by the discussants.3 Competition and Competitive Markets Competition The common economic conception of competition envisions participants in the process of the creation and allocation of economic value trying to outbid each other to obtain what they want. Producers try to obtain resources in order to produce goods, and they compete with other producers to sell them to consumers. The consumers compete with each other, trying to outbid 2
As an economist, I am aware of the methodological requirement of stating all pertinent assumptions at the outset.
So, for those who would find it helpful to place the author in a box, I would identify myself as an evangelical
Christian with heterodox economics leanings. In this paper I try to do justice to various Christian and economic
traditions, but confess that I may not always succeed.
3
There are a number of areas in which arguments rage over the “Christian-ness” of certain economic arrangements,
institutions and structures, most of which are interrelated in a dynamic systems approach to understanding
economics. Space limitations require focusing only on competition in this paper.
2 each other for the goods. Workers compete with each other for jobs and organizations struggle with each other for workers. What is accomplished through all of this is the creation and allocation of the means of physical life and enjoyment, both in goods and services as well as in the work itself. Evaluations of economic competition have often confused “competition” and “competitive market structures.” The confusion is not only the fault of the evaluators; it is also the fault of the economics discipline. In his widely used Principles of Economics text, Mankiw (2009) poses the question “What is Competition?” But rather than defining competition in what follows, he describes a (highly) “competitive market,” a market in which “there are so many buyers and so many sellers that each has a negligible impact on the market price;” that is, no one’s actions affect other participants. This is a structure of interaction that, outside of economics, would hardly be recognized as “competitive.” Not only do we fail to explicitly define competition at the beginning of the establishment of the “principles of economics,” the implicit definition of competition that is given is counterintuitive. A search for definitions of competition in economics yields few useful results. Indeed, McNulty (1968) observes that, Not the least among the many achievements of economic science has been the ability to erect a rigorous analytical system on the principle of competition – a principle so basic to economic reasoning that not even such powerful yet diverse critics of orthodox theory as Marx and Keynes could avoid relying upon it – without ever specifying what, exactly, competition is. 3 Stigler (1972) states, “To the economist, competition denotes the rivalry of the producers of automobiles for the patronage of automobile buyers,” which is limited and begs the definition of rivalry. Smith, Johnson and Hiller (2004) suggest, Competition requires: (1) the presence of some limited goal or a market end result that is, (2) valued and sought by two or more people or social entities (groups, firms, nations), (3) who engage in implicit and/or explicit rivalry, (4) within some set of constraints or boundaries (perhaps rules, perhaps natural geographic territory, perhaps time). This description of competition is more substantial. However, in an economic context it is still problematic as it requires a “limited” goal or end result, while the primary activity of economics is the creation of economic value, a process which itself changes the end result. The difficulty of discussing competition is not limited to economics. If we consider definitions of competition from outside of economics, we find a wide variety of seemingly contradictory conceptualizations. A brief survey of formal definitions yields the following: Competition: The act or process of competing : RIVALRY: as, a: the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms, b: active demand by two or more organisms or kinds of organisms for some environmental resource in short supply. (Mirriam‐Webster, 2010). Competition characterizes a biochemical, ecologic, economic, political, or sporting activity whereby two or more individuals or groups strive antagonistically against one another for some reward. (WordIQ, 2010) Competition: A symbiotic relationship between or among living things for resources, such as food, space, shelter, mate, ecological status, etc. (symbiosis: a long relationship between two different species. To this can be added mutualism (benefit for both), commensalism (benefit for one, neutral for the other), and parasitism (benefit for one, costly for the other).) (Biology‐online, 2010) 4 So competition is “antagonistic” by definition, and it is symbiotic. It is oppositional and a “mutual quest for excellence” (Simon, 2004). It exists when there is a struggle over a resource in short supply or a reward that is exclusionary. Yet through this process of competition, economic value is created (and character developed, as in sports). One of the difficulties in defining competition that we see above arises from an inconsistency in assumptions about value creation and allocation. Using the same term, “competition,” in both zero‐sum and non‐zero sum contexts leads quickly to confusion4. That is, when there is a fixed prize to be won, a specifically determined amount of money or other reward to be allocated, etc., then competition (as contrasted with cooperation) is necessarily a process of rivalrous behavior, leading to an outcome with “winners” and “losers.” Even in contexts where economic value is being created, if the notion of the “the prize” being considered is limited to a zero‐sum concept (e.g. the share of the market or of total income, since all shares must sum to 100%), competition will almost certainly be understood to be fundamentally conflictual. However, if total value creation is considered, competition is not necessarily rivalrous, socially or individually. That is, while buyers may compete for products and producers may compete for sales, the ongoing process of production continues to add to the total value available to all. Whether the result of the competitive environment is evidence of mutualism, commensalism, 4
In game theory, a zero-sum game is one in which the amount that one player wins is equal to the amount that the
other player loses. Measures of, say, income distribution are necessarily zero-sum, since the total income to be
distributed is equal to 100%, and any increase in the share that goes to one group means that other groups receive
smaller shares, regardless of whether total income has increased from previous periods. Kohn (1992) describes this
as a situation of “mutually exclusive goal attainment.” Income growth in an economy is typically non-zero sum over
time, since the total income may be greater after the “game” is played (the work is done), and thus all participants
may have more.
5 or parasitism (the extent to which there are “winners and losers”) depends greatly upon the particular case, the institutions, rules and strategies of the participants involved, as well as the evaluative framework applied and the “benefits and costs” that are admitted into consideration. Thus we will see that it is essential to carefully define the “game” being evaluated and the prize that is presumed to be at stake. Competitive markets In economics, the “market structure” is the set of institutional arrangements and conditions under which producers and consumers coordinate their activities. A competitive market is a formal concept regarding this structure of economic interaction. Democracy is a cooperative structure in which competition is used for allocating power and control for a period of time. Under this arrangement, social benefits derive from the competitive process of leadership selection. The particular benefits received, and those to whom those benefits accrue, would certainly be different depending on who wins an election. A competitive market economy is a cooperative social structure that is used to allocate resources to the project of creating the socially valued means of physical life. Competition is the means by which the social value of goods and services is determined. Prices are the means by which relative values are expressed and the value created is divided among participants. Under this arrangement, economic value is created and allocated according to various institutions, norms and rules. 6 The model5 of a “perfectly” competitive market, for example, assumes many buyers and sellers of the same product, none of whom can individually alter the overall market by any decision of their own. The model also assumes complete information regarding product characteristics, market conditions (including prices), and the ability to enter and leave the market without cost. In this model (only one of many, a point to which we will return), everyone is presumed to have similar capabilities, similar information and access to resources and markets, similar objectives, and a similar environment. The market structure of “perfect” competition, as economists have long defined it, can hardly be called “competitive” in any meaningful sense. Indeed, as McNulty (1968) remarks, “…that perfect competition is a state of affairs quite incompatible with the idea of any and all competition has been insufficiently emphasized.” It is a model of market structure, not a definition of competition. Under this model’s assumptions, the individual attainment of objectives does not restrict others from obtaining their ends as well. It is not, cannot be, aggressive or even fundamentally rivalrous. The concept of the perfectly competitive market in economics is ultimately a purely mechanical functioning of vast numbers of individual or group participants who have no fundamental relationship with each other, since the removal of any participant would have no relevant effect on any other. The expansion of points of economic contact, while diluting relationships, also dilutes economic power. In this model, there is no value assumed to be derived from social relationships qua relationships, and substantial costs 5
Models are the formal abstractions that economists use to help analyze complex social interactions.
7 to concentrated economic power. The conclusions of the economic analysis of the competitive market model are unambiguously positive. While some markets may have a number of these characteristics, few economists believe that this is an adequate representation of any existent market. One might gather that the economic conception of “perfect competition”, then, is vacuous, since in economic competition there can be no winners, only losers, and no one loses except through their own actions. Yet, as a type, we learn a number of things from this model. Indeed, in economics it becomes the standard to which other market structures can only aspire. It yields efficiency, a presumed prerequisite for abundance. There can be no hope of “winning” for one’s self except as one contributes to the creation of economic value, since it is assumed that no one has control over distribution6. No one can effectively inflict harm on others, since there is the assumption of perfect information and alternative choice. If anyone attempts to harm another, the other may simply choose to deal with yet others who do them no harm, and in so doing, demonstrate that the aggression strategy is a losing strategy. Other forms of market structure have been modeled by economists for well over a century, including monopoly and environments with strategic interaction by the firms. Some of these types are closer to the models of market power and exploitative capacity that are assumed by many writers from outside of economics. This yields an unfortunate result. The very cases that those outside of economics refer to as examples of markets with significant, detrimental 6
The extent to which this is not true simply strengthens the economist’s argument in favor of changing the
institutions to promote “competition,” that is, the competitive market structure.
8 “competition” are the same cases that economists point to as “imperfectly competitive,” or even “anti‐competitive.” When economists argue for making markets “more competitive,” then, what they are seeking is policy change to make the market more closely resemble the perfectly competitive model. Increased participation in the market is sought, not an increase in aggressive behaviors and cutthroat attitudes. This increase in participation is a process that dilutes individual power and strengthens the basis for mutual interaction on more equal terms7. Understanding and Evaluating Economic Competition Economic competition is not a game. Evaluating it is an important step in understanding its impacts. Economics, theology and philosophy can each contribute resources to creating understandings of competition (Figure 1). Economics studies the structural and dynamic aspects of competition and makes available a number of insights. Theology, from foundations in belief systems, provides a variety of moral considerations. Philosophy helps to frame the establishment of ethical criteria. As a starting point for the discussion, then, some of the relevant constructs from each might include the concepts in the list in Table 2. From each discipline I have selected only a few constructs which seem to have particular relevance8. 7
The process through which such increased participation is achieved is an important issue. The “Washington
Consensus” of the 1980s and 1990s promoted a particular path to the goal of increased participation which valued
only freedom and neglected justice. That approach ignored the existing economic structures and institutions and the
distribution of economic power, enabling the capture of larger shares of the created value based on that power and
not on the functioning of the yet-to-be-established competitive markets.
8
This of course leaves out much from each discipline, and forgiveness is begged from each. Additionally, the
particular choices made here may seem to be an attempt to restrict each discipline to a fixed realm of inquiry. While
this tendency is common in academic circles, such is not my intent. It is the belief that there is a need for us to have
some understanding, not of what we think, but what the other thinks, that motivates this study.
9 Figure 1: Table 2: Economic – Structural analysis
Economic Value Creation and Allocation
Institutional Structures
Static, Dynamic Processes
Uncertainty, Incomplete Information
Benefit / Cost comparisons
Theological – Moral principles
Caritas / Love
Justice Compassion
Freedom
Creativity
Philosophical – Ethical conceptualizations
Consequentialist
Deontological
Virtue ethics
10 The conceptual resources of economics for the analysis of competitive environments include the idea of economic value creation and allocation. This is the essence of what economics studies9. People engage individually and corporately in the act of transforming their surroundings into that which they find more agreeable for themselves and others. The process by which this takes place includes various social structures and institutions. The actions undertaken may be singular, static engagements or part of ongoing, dynamic processes. The strategic decisions undertaken incorporate information about the social conditions and actions of others that surround the decision makers, information that may be incomplete or asymmetric,10 and about which there may be confidence or significant uncertainty. And economics is (in)famous for structuring analyses on the basis of identifying, as rigorously as possible, the benefits and costs associated with various decisions. Such analysis does not require the quantification of those benefits and costs, only their explicit identification and some measure of relative importance. Economists use the weighing of “costs and benefits” as their standard method of approaching evaluations. Taken to an extreme, Michael Berumen (2003) observes that “the key to analyzing the morality of competition is to understand who benefits and suffers as a result and whether the suffering can be justified using various normative criteria, for example, a voluntary agreement, universal prescriptions, or societal norms.” However, it is on the hard rock of the measurement of such costs and benefits that the analysis is often wrecked. The systems perspective of economics requires attention to both direct and 9
This definition of economics is consciously not the Robbins (1932) definition.
Not all parties to an economic engagement may have the same information when making their decisions.
10
11 indirect effects. The scope of analysis crucially affects one’s evaluations. In practice, analyses of the impact of competition are often partial, looking only at the participants in a particular market engagement, neglecting others who are affected. Possible players11 to be included (separately or together) are: producers; consumers; those excluded from production or consumption by institutional constraints; spectators; and society as a whole as a result of the information generated and the “culture of competition / cooperation” that is created.12 Christian theology begins from fundamental beliefs regarding the nature of God, of humankind, and of creation, as well as the relationships among these. Such central ideas as the imminence and transcendence of God, the creation of humanity in the image of God and the fallenness their current state, the redemptive work of God through the person of Jesus Christ, and the stewardship of creation, shape Christian conceptions of life both as it is and as it ought to be. From this core come moral constructs for the evaluation of human living, among which are love (charity in the classical sense), justice, compassion, freedom and creativity. Careful definition of these ideas and the careful application of them to human decisions lead to an evaluative capacity which can provide moral critique of social and individual arrangements of life and community. 11
Drawing here on the language of game theory, a “player” is an economic agent who has outcomes that depend on
decisions made in the game, available strategies and the ability to choose among them, and an objective by which
the various expected outcomes can be evaluated.
12
Spectators may receive value from the act of watching the competitive engagement itself, as in a professional
sporting event. In this case, the competitive engagement itself becomes the “product” (thing of value created). While
this variation is significant in the sports industry, this kind of competition is fundamentally different from
competition which is part of the market engagement, and is outside of our current consideration. However, to the
extent that members of a society may learn by observing sporting events, or the competitive market engagements of
others, something that they believe should be carried into their own competitive environments (that there is
information content), this effect may be important to consider.
12 Philosophical normative ethics provides outlines for considering what is “good” in human activity. Among such frameworks, consequentialist, deontological, and virtue ethics approaches appear regularly in the evaluation of economic competition. Actions may be assessed on the basis of their consequences (the state of nature that results from the actions). Alternatively, a deontological approach evaluates the actions based on the extent to which they followed a rule or performed a duty, with the consequences of the actions not of fundamental concern. Virtue ethics considers the consistency of actions with the virtuous character of the actor, wisely expressed. Clearly, particular actions taken could be evaluated quite differently by these different approaches. These abstractions give a set of resources, a framework, from which evaluation of economic concepts such as competition may proceed. It is the combination of choices made among such resources, together with the definition of competition considered, that yields profoundly different interpretations of the conditions, outcomes and meanings of economic competition. For example, the evaluation of an economic context of competition which is a static, zero‐sum environment with asymmetric information, considered with primary attention placed on justice, within a consequentialist framework, would yield a familiar, predictable result. If the “economic competition” under consideration is thought to be essentially zero‐sum, with institutional rules that favor one competitor over another, and in which that participant has available substantially aggressive strategies which can be used to dominate a market, the applicable principles (e.g. justice) may be different from those that would inform our 13 understanding of “competition” under conditions growth and relatively equal participation (freedom, creativity). The economic, theological and philosophical categories should not be understood as uni‐
dimensional, since each is its own rich space (e.g. love and justice are not mutually exclusive alternative constructs to be chosen between). Thus this framework should not be considered to be a three‐dimensional analytical tool. It is rather a set of ordered considerations that may be useful in understanding and evaluating economic ideas. The fact that most evaluations of economic phenomena implicitly embody choices within each of these categories means that this framework could help in sorting the issues and clarifying the conversation. I do not argue here that the evaluation of competition should be based on the character of the participants (can morally upright people compete morally while the competition of immoral people would be immoral? Or will the process of competition change (corrupt or improve) their character?), rather than on consideration primarily of the final outcomes of the competition (will there be a morally / ethically acceptable state at the end?). Rather, we can better understand arguments regarding the evaluation of competition on the basis of the ethical and moral quality of the outcomes, though our own tradition or presuppositions may be to consider the process and the rules, when we recognize that such a disagreement is over a philosophical perspective rather than an economic one. 14 Additionally, this framework helps make explicit those implicit considerations that are being used. Economics is a study of both social processes and outcomes, based on human decisions which derive from the values of the individuals and the society. But until relatively recently, the primary methods of mainstream economic evaluation have been deeply rooted in consequentialist criteria (utility maximization, profit maximization, efficiency)13. Commitments to the moral principles of creativity and freedom, along with the primacy of the classic virtues of prudence and temperance are embedded in the thinking of most mainstream economics but almost never discussed. Recently, considerations of institutions and processes have been expanding the field somewhat, though often without specific reference to the implied ethical commitment to deontological evaluation. The institutions are often simply seen as constraints on outcomes rather than the essential elements of social analysis14. The explicit consideration of virtues in economics and their role in and expansion through economic activity is nascent15. With this background of competition and competitive markets laid out, the evaluative task becomes somewhat clearer. It begins with clear explanations of the definitions assumed, the evaluative resources to be employed, and the relative importance of the various factors. We must consider all of the participants in the economic relations we are considering, recognizing that not all of the parties affected by the competitive engagement are competing. We must consider the extent to which value is being created and to whom it is being allocated through 13
For all the discussion of “positive versus normative” in economics, the discipline is inescapably bound to ideas of
“better” and “worse” that go far beyond Paretian criteria. The rhetoric of “deadweight loss” in the case of changes in
distribution is only one example.
14
An exception to this is the rise of Libertarianism with its a priori commitment to individual freedom as an
inviolable rule.
15
See McCloskey (2006) for one expansive example.
15 competitive processes and the institutional arrangements in play. And we need to consider the degree to which different intentions of the competitors affect the creation and allocation of value. Economic, Theological and Ethical Reflections on Competition and Competitive Markets The process of economic value creation and allocation includes resources and work, production, and the distribution of the goods and services created to the final users. Evaluating the role of competition in this process requires the examination of these various economic activities. Throughout these considerations we will see the varieties of economic, theological and philosophical resources that are brought to bear on the questions. Work is valuable because it engages us in expressing the creative capacities with which we are endowed as humankind created in the image of God. It is valuable because it is an expression of our carrying out our biblical mandate of stewardship. And work is valuable because through it we create and obtain the means for physical life. That is, work is both valuable and it creates value. McGrath (1990), in discussing the Calvinist transformation in attitudes toward work, states, Work is thus viewed as a profoundly spiritual activity, a productive and socially beneficial form of prayer…. The transformation of the status of work from a distasteful and degrading activity, to be avoided if possible, to a dignified and glorious means of affirming God and the world he created is one of the most important contributions of Calvinism to western culture…. 16 By engaging in work, we can deepen our spiritual lives and we can expand the capacity for ourselves and others to experience physical life. In the language of economics, this creation of value makes economic engagement a “positive sum” game. Some evaluators argue for or against competition on what are fundamentally virtue ethics grounds. These focus primarily (and sometimes exclusively) on whether the intent of individuals engaged in competition is consistent with biblical standards of behavior. Much of the criticism of competition in general and economic competition in particular centers on questions of intent, that is, the virtue (or lack thereof) of the participants. The particular social outcomes of economic engagement depend on the social institutional structures and rules as well as the strategies of play employed by the various participants. Participants in competition typically have a goal in mind, an objective. The goal of economic competition is most often assumed to be “profit (or utility) maximization,” where profit, in economics, is defined as the value created in excess of the costs of production16. Economic competitors may view profit simply as money, or they may recognize it more properly as created value. The difference is subtle but important. Some competitive actions that increase money income to a participant may not create additional value; it may merely change its allocation. Hence aggressively competitive actions become suspect since they may be efforts to take from others value that those others have created, through no work of one’s 16
Profit, in other contexts, is assumed to result only from a zero-sum interchange rather than from a creative
process. Thus profit is assumed to be evidence of avarice and “taking” from others, rather than of the “making” of
economic value as it is in economics.
17 own but rather through fear, intimidation, manipulation and power17. Alternatively, a participant’s actions may be directed toward improving their own capacity to create value, and they may, through competition, demonstrate that their abilities surpass the abilities of others, and that the value that they create is perceived by others as greater.18 Thus “winning” and “losing” may indicate very different things about competition. Many will not act rightly, (in accordance with the stewardship mandate that they were created into). In a world that has been badly damaged by sin, trust has been broken, the spiritual foundations of stewardship and creativity in work have been misplaced, and we do not know all that we need to know. To be sure, the image of God has been shattered, not destroyed, so the capacity to engage the mandate still exists (White, 1987). But the damage has been done. Strategies of power, sloth and aggression have been added to those of effort and improvement. Competition can serve to provide information where information is lacking about the effectiveness of decisions and effort for providing value to others, or it can facilitate the increase of power to gain advantage over the less well‐endowed. Competition can demonstrate the superiority of effort and resource use, pointing to excellence and creativity, or it can be applied to destroy the capabilities of others. Competition can provide incentives to work hard and to improve, or it can become a vehicle for carrying aggression into subsistence areas of life. Co‐laborers become contestants, and the outcome can be life‐threatening. 17
Violations of such principles as fair dealing (economic exchange must be conducted without deceit (Lev 19:35‐
36; Deut 25:13‐16)), unjust gain, exploitation of power, oppression of the poor (Ezek 22:12‐13, 27‐29; Amos 4:4‐7; Hosea 13:7‐8), etc. 18
The question of whether consumption values are able to be manipulated is one that is often raised. This is both a
question of the institutions that are in place and a question about the dynamic ability of participants to change the
value structures of others without the other’s knowledge and/or consent.
18 An additional consideration is the dynamic impact of competition on the participants. Economic success begets success. Profits accrue to the victor as a part of the value that they have created. These profits further capacitate the victor, affirming their strategies and actions, and providing the resources for further improvement and expansion of their capabilities. They are rewarded for creating value and those rewards can assist them to create even more value. They, and others who learn from them, have the incentive to continue improving their abilities. But if the profits accrue not from the creation of value but from the ability to extract profit from others (whether through the use of market power, institutional manipulation, or the direct violation of rules), those profits would be seen as a reward for those strategies. The difficulty is that money is an inadequate measure of the means of acquiring it. But beyond that, gaining money may itself be perceived as problematical, for it may not lead to increased concern for seeking out further ways to create value, but rather to an “increase in pride19, in anger, in the desire of the flesh, the desire of the eyes, and the pride of life,” conditions that Wesley contends can be addressed by insisting that: We ought not to forbid people to be diligent and frugal: we must exhort all Christians, to gain all they can, and to save all they can: that is, in effect, to grow rich! What way then (I ask again) can we take that our money may not sink us to the nethermost hell? There is one way, and there is no other under heaven. If those who gain all they can, and save all they can, will likewise give all they can, then the more they gain, the more they will grow in grace, and the more treasure they will lay up in heaven. (Wesley, 1786 / 1828). 19
Pride (a relatively higher ranking may entice a person to confuse performance with identity (Jer 49:16, James 4:6)) 19 A further concern can be expressed regarding the dynamic impact of competition on those who lose. Competing and losing can motivate people to learn and improve, so that they can better perform in the next competition. Yet economic competition bears with it more than just the loss of a contest, but possibly the development of fear, hatred and envy20. It may also include the loss of the means that one had for creating value, the de‐capacitation for future participation in work and in life. Ultimately it can lead to severe physical deprivation and death. Wilhelm Ropke (1989) concludes that “It cannot be stated often enough that in the last resort competition has to be circumscribed and mitigated by moral forces within the market parties.” R. Scott Reavely (1992) states that “Competition is a moral issue because it has to do with how we treat our fellow human beings…. The moral aspect of competition comes into play when qualities necessary in competition oppose qualities necessary to live as a Christian.” Reavely focuses much of his attention on competitive ambition (the desire to win, to be ranked ahead of others (Luke 14:7‐11; James 3:13‐16)) in contrast to the fruit of the Spirit (Gal 5:22 (love, joy, peace, patience, kindness, goodness, faithfulness, gentleness, and self‐control). Similarly, Richard Mouw (1989) sees the intentions of economic competitors as generally in conflict with biblical norms: Many people are living out their rebellion against God in the economic arena. … What are some of the marks of this economic rebellion? Well, for one thing, sin shows up in people’s personal attitudes. We are envious and aggressively competitive. We covet things that others have, and we desire more than our share of the earth’s riches. 20
Envy (a relatively lower ranking may entice a person to confuse performance with identity (Job 5:2, Prov 14:30)) 20 Calvin, in his call to moderation and self‐denial, alludes to pride and competitiveness as core moral problems when he observes that, “The poor man yields to the rich, the plebeian to the noble, the servant to the master, the unlearned to the learned, and yet every one inwardly cherishes some idea of his own superiority. … For this there is no other remedy than to pluck up by the roots those most noxious pests, self‐love and love of victory.” And further in discussing Christian liberty in consumption, he says, For there is scarcely any one whose means allow him to live sumptuously, who does not delight in feasting, and dress, and the luxurious grandeur of his house, who wishes not to surpass his neighbor in every kind of delicacy, and does not plume himself amazingly on his splendor. And all these things are defended under the pretext of Christian liberty. They say they are things indifferent: I admit it, provided they are used indifferently. But when they are too eagerly longed for, when they are proudly boasted of, when they are indulged in luxurious profusion, things which otherwise were in themselves lawful are certainly defiled by these vices (emphasis added). Reavely (1992) concludes his theological evaluation of competition with the caution that “Christ demands balance‐ competition tends to extremes. Christ harnessed ambition‐ competition unleashes it. God sets limits on competition‐ success would demand pressing the limits.” Conversely, Noebel (2006) argues that the values of hard work and striving for excellence are served by a competitive environment, … competition through comparative advantage … reinforces our worth and dignity in the sense that our work and diligence contribute to the welfare of society as a whole. Comparative advantage allows us the opportunity to become the best producer of a service or product. Thus, competition that leads to cooperation and the recognition of individual worth harmonizes with the Christian worldview, which sees human beings as image‐bearers of God. In these analyses, the intent of the competitive participants is the heart of the matter. The analytical challenge in this approach, then, is to firmly establish (as opposed to presupposing) 21 what is the intent of the participants. To merely assume that economic competitors are avaricious (or, that they are pure of heart) is, of course, to assume the analyses’ “conclusions.” Other analyses address the structures and institutions of competitive markets. Some of these analyses are concerned with the kind of character development that is brought about through the institutions. Character is built by the choices one makes, yet the environment can limit those choices, and can reward certain choices and penalize others, either intentionally or unintentionally through the structures, rules and institutions in place. There is extensive debate as to whether it is the individual or the institutional environment which is then responsible for the subsequent decisions, economic outcomes, and the resultant character development of the individuals and indeed all of society. For example, in his landmark response to the rise of Marxism, Rerum Novarum, Pope Leo XIII (1891) observed that the intentions of employers in “competitive” labor markets combined with market conditions had led to the de‐humanization of industrial workers: “… by degrees it has come to pass that working men have been surrendered, isolated and helpless, to the hardheartedness of employers and the greed of unchecked competition…. Such men feel in most cases that they have been fooled by empty promises and deceived by false pretexts. They cannot but perceive that their grasping employers too often treat them with great inhumanity and hardly care for them outside the profit their labor brings.” 21 However, economic competition may also “nourish the virtues” (McCloskey, 2004). In a separate context, but one applicable to the current discussion, Armstrong (2003) asserts the 21
Rerum Novarum was not a move to Marxism, which it condemned. Included in it was a call for the establishment of Catholic trade associations that would embody hope while rebalancing power in the relationship between employer and worker. 22 belief that “sports, especially team sports, developed character, fostered patriotism, and instilled virtues that would serve their participants—and their participants' God—well in later life. In other words, team games taught their own high ethic, and that ethic could and should be a Christian one.” A conclusion reasonably derived from the Calvinist work ethic described above is that one outcome of economic competition is the teaching of similar lessons. Not only does character matter for evaluating a competitive economic environment, but character is formed by that environment. To determine whether this is a virtue‐enhancing effect or a virtue‐
degrading one, the analysis must carefully evaluate, rather than presume, the kind of transforming effect competition has. We find the deontological conceptualization of normative ethics incorporated in institutional analyses of competition that emphasize the structures under which human interaction takes place. From this perspective, the important thing is for the institutional arrangements to be acceptable (e.g. either “fair,” or “free,” etc.). If these arrangements are properly constructed, then neither the intentions nor the outcomes of the interactions are of crucial importance, since it is presumed that the actions and results are taken within an environment that will sufficiently moderate them over time. Economic institutional arrangements can facilitate the establishment of opportunities for the creation of economic value. Structures which are built upon creating competitive engagements are designed to create incentives for work, so that even those who do not recognize their mandate in creation will seek to create value. And yet, these institutional arrangements can be 23 constructed to favor a few and can destroy both people and opportunity. The call to active engagement with the world through work can be turned into functional slavery, with the created value being allocated to only some of those engaged in the creative process. And even with the best of intentions, with fairness and equal application of rules to all, any structural arrangement creates an environment in which those best suited to accomplishment under those rules will win. No environment with rules can be unbiased22. The pattern of competitive advantage that emerges is institutionally dependent, and a different set of rules may yield a different pattern of advantage. Institutional evaluations of the context of competition often point to freedom as an (the) essential consideration for evaluating institutions; the freedom to decide, act, create, express, etc. (cf. Friedman and Friedman, 1980). And yet Cavanaugh (2008), Barrera (2005), and Roemer (1988) each question in detail whether all participants in a competitive market economy are truly free to choose. Still other evaluations are launched on consequentialist grounds, that it is by the outcomes of the competitive market that we should evaluate it. For example, on decadal anniversaries of the issuance of Rerum Novarum, other popes have elaborated and updated this call. Pope Pius XI (1931) stated that, “But free competition, while justified and certainly useful provided it is kept within certain limits, clearly cannot direct economic life ‐ a truth which the outcome of the 22
It is well to recognize that even an environment in which there are no rules is in fact an environment that has a
rule (“no rules”), and that some people will be better suited to succeed in that environment than others.
24 application in practice of the tenets of this evil individualistic spirit has more than sufficiently demonstrated.” That is, the lack of virtue, “this evil individualistic spirit,” yields an undesired outcome. However, Noebel (2006) asserts that, In reviewing the notion of Christian economics, the Bible teaches that workers deserve their pay, and those that work hard are rewarded, while those who are lazy remain poor (Proverbs 10:4, 14:23; Luke 10:7). These teachings imply that competition in the workplace leads to fruitfulness. However, Christians who believe a socialist economic system is more biblical than a capitalist system contend that competition is evil in that it leads to greed and envy, and competition for limited resources is counterproductive (emphasis added). While serious social ills are often attributed to competitive market structures, it is also true that support for these structures are often based on consideration of (other) outcomes. “The biblical admonitions to clothe the naked, feed the hungry and do other acts of personal charity presume our economic ability to do these things” (Chewning, 1989). And a competitive environment “provides incentives for efficiency, fosters productivity, and freedom of choice within structure” (Blank, 2004). This in turn “forces costs down [which benefits consumers]. … international competition makes for efficiency [good stewardship] in the use of scarce world resources (land, labor, capital), thereby insuring (sic) the greatest possible output and the highest possible living standards” (Klay, 1992). Outcomes‐evaluated analyses of economic competition are perhaps the most common and the most disputed. When discussants are all approaching the evaluation from an outcomes orientation, it is the values of the discussants, and the consequent differences in the particular outcomes criteria utilized, that are the primary source of disagreement. Competitive market 25 structures tend to produce both “economic fruitfulness” and “economic injustice.” On purely consequentialist grounds, it becomes a matter of how those outcomes are measured and the relative weighting the discussant gives to those outcomes that drive the debate. In a final example, we can see that this framework for considering competition can highlight usefully the limitations of some analyses. Beed (2005) examines the statements of Jesus regarding human relations and competition. He concludes that, Jesus’ sayings that bear on competitive behavioral traits lead to an overall conclusion. To meet Jesus’ demands, the most practical means of running one’s life, of maintaining the closest possible relations with the triune God, of optimizing good relations with other people, including operating businesses, is on a basis that does good to other people for which the guidance of God is a prerequisite. If a Christian business person does not want other firms to capture a share of her market, she should not seek to do the same thing to them. Beed defines “good relations” here as the primary objective to be “optimized.” He then limits the context of those relationships to a zero‐sum context involving only producers. However, we know that the parties to this market activity include the consumers as well as the producers. That is, the “good [done] to other people” must include the good done to consumers, and that good must be understood over time. The assertion that market shares (the percent of the market’s total sales for each firm) should not change presumes that market shares were 1) the appropriate measure of outcomes and, 2) somehow Rightly Divided (divinely appointed?) at the outset of the analysis. Indeed, the static condition that Beed assumes here is incorrect. The situation at issue is a dynamic one. Misperceiving it as a fixed state and demanding the continuation of the existing market shares could lead to the significant deterioration of other dimensions of social and individual well being, (e.g. the exploitation of the consumer through 26 collusion of the producers). Also, the capture of market share, particularly in an expanding market, may indicate that the expanding producer has worked hard for the benefit of the consumer, and the other producer has failed to do so (perhaps through sloth). That is, the framework here reminds us to ask (in this case economic) questions of the analyses in areas that may have been overlooked. Conclusion This paper has attempted to shed light on the roots of disagreement regarding evaluations of competition in economics. By focusing on definitions of competition, economic structure, theological resources and ethical conceptualizations, I have attempted to position a few passages from works on competition in relation to each other in hopes of illustrating the strengths and the gaps in each analysis. The most fruitless debates are those between discussants who approach economic competition and competitive markets on fundamentally different grounds. This framework should at least help to identify those cases. I hope that this conversation can continue, since this can hardly pretend to be a definitive statement of the issues at hand. Economics studies social interactions. That is, for all its abstract theorizing, the “social science” of economics fundamentally addresses social interaction as it is, not as it would be in an ideal social environment. People are both good and bad (they live in the shattered image of God). They are both individual and social; they are competitive and cooperative. Ultimately, it is important to recognize that no set of institutional arrangements will heal the brokenness and 27 set it all right. Therefore, the purpose of Christian economic and social analysis is not to seek to change the institutional arrangements to conform to Christian principles, presupposing that all of humanity would then act in accordance with those principles. Rather it is to advocate for changes that elicit right actions from even those who would not otherwise act rightly of themselves, and to promote structures which protect the life and dignity of all when those right actions are not forthcoming. 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