Comments due by Feb. 15, 2015Many people view economics as morally suspect because they perceive economics as emphasizing competition, rather than the arguably more virtuous approach of cooperation.
When I bump into this concern, I often respond that economics seeks to analyze the world as it is, not as we might prefer it to be. We live in an economy in which consumers often seek the best deal; workers commonly seek the job with the best mixture of work conditions and compensation; and firms seek higher profits. If you want to discuss the real-world economy, diagnose problems and suggest solutions, the presence of competition and self-interest among individuals and firms is typically a useful working assumption. The study of economics and public policy would be quite different in a hypothetical world of perfect cooperators.
This response typically works, in the sense that the questioner is more or less satisfied with having received an answer. However, I fear that it concedes too much ground. Specifically, it risks conceding that competition and cooperation are, indeed, opposites, with vice on one side and virtue on the other. But this is a false dichotomy.
Instead, a concept of cooperation is actually embedded in the meaning of the word "compete." According to the Oxford English Dictionary, "compete" derives from Latin, in which "com-" means "together" and "petĕre" has a variety of meanings that include "to fall upon, assail, aim at, make for, try to reach, strive after, sue for, solicit, ask, seek." Based on this derivation, valid meanings of competition would be "to aim at together," "to try to reach together," and "to strive after together."
Competition can come in many forms. The version of competition that economists typically invoke when discussing markets is not about wolves competing in a pen full of sheep; nor is it competition among weeds to choke a flowerbed. The market-based competition envisioned in economics is disciplined by rules and reputations, and those who break the rules through fraud, theft or other offenses are clearly outside the shared process of market competition.
Market-based competition is closer in spirit to the interaction among Olympic figure skaters, in which pressure from other competitors and from outside judges pushes individuals to seek innovations, to strive for doing the old and familiar in better ways. Sure, the figure skaters are trying their hardest to compete and win, but their process of competing under agreed-upon rules is a deeply cooperative and shared enterprise. In the 1994 U.S. Figure Skating Championships, when the ex-husband of skater Tonya Harding hired a thug to try to break the leg of another skater, Nancy Kerrigan, the attack was clearly outside the meaning of competition because it breached the cooperative essence behind how Olympic competition works.
Just as competition is not a shorthand for "anything goes," the quick and thoughtless inference that cooperation is necessarily virtuous is often unjustified. In many cases, cooperation is a tool for an in-group to take advantage of those outside the group. For example, if large companies cooperate to lobby national politicians for policies that impose costs on consumers and taxpayers as a way of adding to corporate profits and bailing them out for their mistakes, it is surely not an example of virtuous behavior. If firms cooperate in an attempt to raise the prices that they charge to consumers, it is illegal under the antitrust laws because it represents a failure to compete. Those who seek to discriminate based on race, gender and ethnicity often demonstrate a high degree of cooperation with others who share their views. Criminals often cooperate with each other by refusing to rat out other criminals. War often involves a conflict between societies that show high levels of internal cooperation.
In short, real-world examples of "cooperation" are often not as selfless as, say, volunteering to donate blood or anonymously sending cash to a charity. Instead, real-world cooperation is often enforced by a group of peers, using a combination of economic, legal and social incentives to reward those who act with the group and to impose costs on those outside the group. Those who are quick to believe that cooperation should be automatically equated with virtue should take a step back and consider both what each specific cooperative behavior is intended to achieve and how it is enforced among those within the group who might have preferred not to cooperate in a certain situation.
In contrast, competition within a market context actually happens as a series of genuinely cooperative decisions, every time a buyer and seller come together in a mutually agreed-upon and voluntarily made transaction. This idea of cooperation within the market is at the heart of what the philosopher Robert Nozick referred to in his 1974 work, Anarchy, State, and Utopia, as "capitalist acts between consenting adults."1
When Steve Jobs died in 2011, the media were full of glowing praise for how he had transformed the world of consumer electronics several times over, from the personal computer to the portable music player to the smartphone. But if you know anything about Steve Jobs as a person (and I recommend the eponymous 2011 biography by Walter Isaacson2), you know that Jobs was often driven, tactless and harsh—in many ways the opposite of what would conventionally be regarded as a cooperative personality. But the type of cooperation implicit within competition does not require that the competitors themselves be warm and friendly toward each other. Like many other hard-driving business leaders, Jobs competed like the market-sector equivalent of an Olympic skater, striving together with competitors from other firms in a rule-based process to win an innovation contest. Millions of people then demonstrated their desire to cooperate with Apple by purchasing the products that Jobs played a substantial role in designing and bringing to market.
Thinking about markets as a blend of competition and cooperation has become more or less standard in business schools. Back in 1996, for example, Adam M. Brandenburger and Barry J. Nalebuff wrote a prominent book called Co-opetition, which is, as it says on the cover, "a revolutionary mindset that combines competition and cooperation."3 That word "revolutionary" contains a bit of puffery, but the book usefully points out many ways in which competition and cooperation are intertwined.
For example, many firms either have or hope to have ongoing relationships with their customers, and they benefit when customers offer them honest feedback and communication. Similarly, many firms rely on long-term relationships with suppliers, and they count on those suppliers to make long-term investments and to pursue innovations in a cooperative manner. If firms in a certain market were only competitors, then gains for one firm should always mean corresponding losses for the other. But if the competitors of a firm in a given market act in a way that makes the product appear unsafe or the industry appear irresponsible, then all firms in that industry may well suffer as a result. Conversely, if competitors in a market innovate in a way that opens up new market opportunities, almost all firms in that market can often find ways to benefit.
For more on the relationship between competition and cooperation, see the EconTalk podcast episode Otteson on Adam Smith and its discussion of Adam Smith's early use of the term "the invisible hand" to capture the effects of self-interest and competition in producing a result akin to cooperation, in The Theory of Moral Sentiments, para. IV.I.10:
They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society....
In short, competition and cooperation are not polar opposites. Competition refers to a situation in which people or organizations (such as firms) apply their efforts and talents toward a certain goal, and they receive results based substantially on their performance relative to each other. The true opposite of competition would be a situation in which those who strive to meet a certain goal experience outcomes that have little or nothing to do with their actual performance, as occurs when government overrides the process of competition by offering subsidies to loss-making firms.
Cooperation refers to a situation in which the participants seek out win-win outcomes from working together. Thus, the opposite of cooperation would be a situation in which such win-win outcomes are difficult or discouraged. For example, this could reflect a situation of lawlessness or a set of social norms in which people expect that cooperative agreements are likely to be broken—and, thus, the incentive to cooperate is low.
If both competition and cooperation are understood as voluntary choices (and, after all, "involuntary cooperation" is an oxymoron), then a fully planned economy would be the opposite of both competition and cooperation. When government dictates prices and quantities, a planned economy eliminates the incentives of market participants—whether suppliers, producers, or consumers—either to compete or to cooperate.
Those of us who self-identify as economists should not wear the terminology of "competition" as a badge of shame, while wistfully contemplating a presumed ideal of cooperation. For the study of economics, as in the real-world economy, the concepts and practices of competition and cooperation are inevitably interlocking.
Footnotes
*Timothy Taylor is Managing Editor of the Journal of Economic Perspectives
21 comments:
Competition and cooperation apparently are very widespread factors accross the economy. They are not polar opposites, and the fact that they are related is interesting. I believe one would cease to exist without the other. For a sporting event or competition to be successful, participants must cooperate by adhering to the rules. Cooperation is also evidence that there is some type of competition taking place. There are many real world examples, the most prominent being law & order. Citizens cooperate in society for fear of prosecution, or simply the thought that they are doing something wrong. We have been kept under a cooperative scope since childhood. There are many real world examples of people who neglect these laws, trying to make their way around them. Recently I read about the various thefts taking place through computers. Hackers located in many places around the world have found a way to steal money while making it nearly impossible for law enforcement to track them. In our economy, cooperation is stressed so businesses can have a fair opportunity for success. Monopolies do not exist, although some companies like Amazon can almost be considered just that. Competition is welcomed, and it was thought provoking to read about its relationship with cooperation.
This article is really interesting since it makes the reader look at something very prominent in the economy in a different way. People would assume that competition and co-operation are polar opposites especially when regards to business because helping another business could eventually make them as good or better than your own business. Although this may be the assumption, the article says that it's false since people/businesses co-operate in order for everyone involved to gain a reward out of it. Through this co-operation, the business involved may also gain a greater advantage, causing problems towards their competition.
Another really interesting point that the article brings up is that competition can only exist through co-operation. In order for there to be any form of competition, whether it be business, sports or perhaps even in a board game, all competitors must co-operate by following the rules. If they don't follow the rules then there would be no competition to begin with.
Competition and Co-operation are truly related to one another. As Nicholas Saviano says, "one would cease to exist without the other."
If you want to be successful in the business world you need competition to push you. When you are in competition it pushes you to strive for greatness. Yes you must Cooperate within the rules, but you must do what you can to make your firm or business better than the others. Whatever it takes. Without competition people wouldn't strive for greatness as much as we do. Competition is what pushes you to get up in the morning and achieve what you could not yesterday.
One would believe that competition and cooperation are totally opposites and they can't benefit from each other. After reading this article I learned that in the business world you must have cooperation in order for competition. Both are good things. We need competition in order to succeed. If every company/business were the same, none would be differentiated. They need to always try and be ahead of one another or else the business world would not move forward. In order to gain this competition, the article explains that companies must work together (cooperation). Before reading this article, I felt that these two terms had nothing to do with each other, but Nicholas Saviano states that "one would cease to exist without the other". He is very right and businesses need to learn how to compete in a proper way in order for their businesses to succeed.
This article was particularly intriguing to me because I fall under the category of people who always thought that competition and cooperation were two polar opposites. As a child, the gym teacher would always explain how we need to cooperate with one another and not compete. It turns out, both are needed to be efficient and effective in life. In the ideal economy, companies compete with one another only to advance and succeed in produced output and in turn cooperate with one another. There are rules and regulations in place to keep the market competition fair and even, those who partake in fraud, theft or other offenses do not play a productive role in the market competition. Cooperation however, is not as nice as people make it sound to be. Many times, cooperation is just a way for people in a certain group to take advantage of those who are not a part of their clique. Regardless, when a buyer and a seller come together and make a transaction, the traditional meeting of cooperation still persists.
This article is very interesting because it shows how companies outside and within the same field or industry are competing against one another but at the same time need each other cooperation in order to be successful individually. During this day and age we see how being the best and self-interest can tend to be the most important thing in everyone lives. Everyday we see less and less of people helping each other out for the greater good of the whole but competition is a necessary aspect of the economy and the world; without competition many of the world greatest innovation would cease to exist.
Cooperation is need to be successful in the business world, companies must work together in order to achieve greater profits and higher standard on products. The word compete means coming together to achieve one goal or objection; so without cooperation from people or groups no one would be able to achieve these goals. As an athlete I see how cooperation is implemented everyday on the field, every player wants to be the star and score all the goal but if a team and players aren't able to work together and take on their individual roles, the team will never be successful and compete for a championship.
Companies are always competing against each other to earn higher profits and revenue but companies feed off each other ideas in order to be successful as a whole. When one company discover a more innovative ways to produce a products other companies in that field soon fall in line in order to join in on the success that comes with it. Companies also have to cooperate and create good connection with companies that provide resources in order to make some product. So without cooperation of companies throughout the economy it would make it extremely difficult for people and firms to be successful.
Competition is necessary in our current society in order to succeed and grow as a nation. Without competition there would be no reason to strive to become better everyday or make the latest invention to make your product better. This article explains however that in order to gain competition cooperation is necessary. I feel as though competition and cooperation are completely opposite of each other, I do however believe that it is possible to have some cooperation with your competitors.
This article discusses two very important terms in economics and in everyday life - competition and cooperation. Many individuals will argue that economics emphasizes competition however; I believe that without cooperation there cannot be fair competition.
When thinking of competition within the economy many individuals primarily tend to think of big corporations constantly buying out smaller businesses. They only see this as a demonstration of competition. What individuals fail to realize is that this method of competition is regulated by many rules and require that corporations cooperate with those rules. These rules are implemented so there is an equal opportunity to thrive in the economy for everyone.
This article brings up two important topics. The first is competition, i believe that competition is very important in order to move foward and to advance our products in better ways with more inocations. Cooperation is bery important but is not used as much. Even thought it could be used in order to reach a common goal there would be less need for inovation.
In a good and growing economy, there needs to be a healthy blend of competition and cooperation. In the United States, I would say there is that and that is why we continue to grow and prosper. On the sense of competition, this is the main factor of economic growth on the business side. Competition leads to new innovations, to new companies and corporations, which in turn leads to more jobs and more income within the working force and overall economy. Competition leads to new and improved products or completely different ideas all together. Now cooperation is also helpful for the business standpoint of the economy and also the consumer side. For the business side, it helps grow a sector overall and that leads to higher numbers of prosperity for the companies or corporations. On the consumer standpoint, the adjustment by the companies would lead to a more fair price, as that side of competition is wiped out due to the cooperation.
Overall cooperation and competition are critiqued by people, but I believe it is necessary for both to be in place of an economy.
This article is about competition and cooperation, some thought them to be opposites but one is needed just as much as the other. Competition without cooperation would be a dead end street with no room for expansion or growth. Cooperation without competition would have no need for entrepreneurs and could possibly create a monopoly within their area. These two ideas may work better for different companies but the best businesses have a nice balance of each.
This article can really change somebody's view on cooperation and competition in the economy. Many people think that these two are completely different from each other, however they are actually related. To succeed in the business world you must have competition in order to have cooperation. There are rules and regulations that everybody has to cooperate with as well. There needs to be competition simply because without it there could become future monopolies in that area of business. If companies/business want to have this competition they must cooperate with other businesses. Cooperation basically just means having a good relation with one company in order to make transactions with them (a buyer and seller coming together). The cooperation between businesses also helps because then it brings competition into the mix and companies want to strive to be better. Without competition there would be no cooperation and vice versa. In a good and growing economy there is a good combination of both and the article explains that very well.
Brian DelVecchio said...
The overall idea of economics is interesting and understandable. It often feels like businesses are attempting to swindle consumers as well as other businesses. Much of this is due to the fact that most of us are not on that side of the economic spectrum. Business can at times not be pretty or selfless but successful business is generally a process of events that required cooperation from all parties. That cooperation can be stressful, irritiating, and difficult to attain but it is in fact what makes the economy go as smoohly as
I was very intrigued by this article. I always had thought that the economy was all about competition. But however, it actually includes a great deal of cooperation as well. I believe a focus on competition is more effective, because of the "rival business" ideology. If you have a competitor that is doing better, or as good as you, it will push you to work harder. One example being McDonald's and Burger King, they are where they are today because of their competition.
Without competition, we would not have grown as much as we have as an economical society. Goods are continually improving as a result of competition. Those with the best product for a reasonable price will succeed in selling. However, you need to be able to cooperate with the competitors in your market to be to keep the economy in a healthy balance. Sometimes cooperation and competition contradict each other and finding a balance is difficult or nearly impossible. This article explains that to gain more competition, cooperation is a necessity and I believe that to be true.
I do believe that in any aspect of life, without cooperation of a person or firm, there will be no rightful competition to compete against.
“Competition refers to a situation in which people or organizations (such as firms) apply their efforts and talents toward a certain goal, and they receive results based substantially on their performance relative to each other.” I believe that every business in this economy bases their views and standpoints on competition. Just like the article said, Apple showed how they could succeed through the several different products they were able to produce. Apple’s main purpose is to succeed in business, but they also have to make sure they can succeed and beat out their competition, other companies such as Samsung. I believe that for every business or sport, there will always be a competitor trying to beat you in the game.
This is when cooperation comes into affect. “Cooperation refers to a situation in which the participants seek out win-win outcomes from working together.” If each company or person succeeds at cooperation, then there will be benefits for each party. If you are a basketball player, you must cooperate with the rules and regulations of the game in order for each team and player to benefit and play the game properly. “…. Real-world cooperation is often enforced by a group of peers, using a combination of economic, legal and social incentives to reward those who act with the group and to impose costs on those outside the group.” With each party in cooperation of the terms, we have a chance of making for a better economy and rightful competition.
There are always similarities and differences when discussing competition and cooperation. However having a mixture of both can be beneficial for anything you decide to do and choose to be apart of. Competition can help lead to multiple new inventions for companies or corporations that can improve an economy. The same goes for cooperation where, in business, can be beneficial on the creation part of a project. But there are also times where those may abuse the respectable concepts of competition and cooperation. As the article said, “competition does not require that the competitors themselves be warm and friendly toward each other.”
For example, two huge corporations may choose to unite with one another just to eliminate the other competition which gives smaller corporations, companies, and businesses a disadvantage in a market that should be considered just and equal. Another example would be groups of people, who are biased against a variety of others and decide to exclude themselves or not contribute with them because they do not share the same beliefs, are discriminative, or may be narrow-minded to the ideas the group may have. This article is very interesting because it depicts on both the positive margin of having pure completion and cooperation while also portraying the negative that too become a factor. Overall, I believe to grow a successful economy, there should be a productive balance of both competition and cooperation
Cooperation and competition are necessary factors in this economy that are interrelated. For instance, this article describes Steve Jobs as a more competitive player. Not only was he competitive, but other businesses were forced to cooperate with Apple by purchasing their products. In order to become successful, you must strive to be the best. Whether it be through harshness, drive, or cooperating with other businesses, all these methods are intertwined.
This article talks about a interesting relationship between competition and cooperation. When a economist says competition it invokes an idea of a wolf in a sheep's pen in many people's minds. Contrarily, many people have the opposite idea when they hear the word cooperation and think of too many cooks spoil the broth. These two popular views are not true as this article goes on to tell us. In fact, competition and cooperation are used everyday in this market economy. Its like playing a game of baseball. Both teams decide on the rules before playing the game, this is called cooperation. In the market economy the rules are laws. Then the two teams play each other to try to beat each other, this is the competition part. Competition in a market economy would be the selling of the finished product.
I believe that history told ua one thing that cooperation tend tk be better than competition. this has been scientifically that cooperations auch as joint ventures, mutual funds have better return and less risk than corporations who are at always each other's throat. Though we tend to uphold freud's beliefs that " competition is royal road to success" history has companjes have thrived on huge joint ventures through cooperations. Cooepration improves the focus on task is at hand, it allows ample of time to build a decent strategy, increase information exchange, and provide a learning curve and act as a problem solving tool. It improves team efforts and the encourages problem solving collectively.
this has been posted by syed talha sajjad
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