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The Classical Notion of Competition Revisited

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  • Neri Salvadori
  • Rodolfo Signorino

Abstract

This article seeks to fill a lacuna within classical economics concerning the process of market price determination in situations of market disequilibrium. To this aim, first we distinguish the classical notion of free competition from the Walrasian notion of perfect competition and we argue that the latter is beset with some theoretical difficulties alien to the former. Second, we reconstruct in some detail Smith’s and Marx’s views concerning market price determination and show that Marx’s extensive use of metaphors and numerical examples foreshadows the modern taxonomy of buyers’ market, sellers’ market, and mixed strategy equilibrium in the capacity space of a standard Bertrand duopoly model. Finally, we highlight similarities and differences between the classical notion of competition and contemporary Bertrand competition models.

Suggested Citation

  • Neri Salvadori & Rodolfo Signorino, 2013. "The Classical Notion of Competition Revisited," History of Political Economy, Duke University Press, vol. 45(1), pages 149-175, Spring.
    • Handle: RePEc:hop:hopeec:v:45:y:2013:i:1:p:149-175
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    1. Mark Blaug, 1999. "Misunderstanding Classical Economics: The Sraffian Interpretation of the Surplus Approach," History of Political Economy, Duke University Press, vol. 31(2), pages 213-236, Summer.
    2. Kaldor, Nicholas, 1972. "The Irrelevance of Equilibrium Economics," Economic Journal, Royal Economic Society, vol. 82(328), pages 1237-1255, December.
    3. Kurz,Heinz D. & Salvadori,Neri, 1997. "Theory of Production," Cambridge Books, Cambridge University Press, number 9780521588676.
    4. Garegnani, Pierangelo, 1984. "Value and Distribution in the Classical Economists and Marx," Oxford Economic Papers, Oxford University Press, vol. 36(2), pages 291-325, June.
    5. Paul J. McNulty, 1967. "A Note on the History of Perfect Competition," Journal of Political Economy, University of Chicago Press, vol. 75, pages 395-395.
    6. Clarence C. Morrison, 2001. "Magnan de Bornier on Cournot-Bertrand," History of Political Economy, Duke University Press, vol. 33(1), pages 161-165, Spring.
    7. Dumenil, Gerard & Levy, Dominique, 1987. "The Dynamics of Competition: A Restoration of the Classical Analysis," Cambridge Journal of Economics, Oxford University Press, vol. 11(2), pages 133-164, June.
    8. Samuelson, Paul A, 1978. "The Canonical Classical Model of Political Economy," Journal of Economic Literature, American Economic Association, vol. 16(4), pages 1415-1434, December.
    9. Clarence Morrison, 1998. "Cournot, bertrand, and modern game theory," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(2), pages 172-174, June.
    10. Andrea Lavezzi, 2003. "Smith, Marshall and Young on division of labour and economic growth," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 10(1), pages 81-108.
    11. Richard Arena, 1979. "Note sur la conception classique de la concurrence," Cahiers d'Économie Politique, Programme National Persée, vol. 5(1), pages 119-148.
    12. Heinz D. Kurz & Neri Salvadori, 2002. "Mark Blaug on the “Sraffian Interpretation of the Surplus Approach”," History of Political Economy, Duke University Press, vol. 34(1), pages 225-236, Spring.
    13. Vickers, John, 1995. "Concepts of Competition," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 1-23, January.
    14. Heinz Kurz & Neri Salvadori, 2000. "'Classical' Roots of Input-Output Analysis: A Short Account of its Long Prehistory," Economic Systems Research, Taylor & Francis Journals, vol. 12(2), pages 153-179.
    15. Garegnani, Pierangelo, 1983. "The Classical Theory of Wages and the Role of Demand Schedules in the Determination of Relative Prices," American Economic Review, American Economic Association, vol. 73(2), pages 309-313, May.
    16. Nicola GIOCOLI, 2005. "Modeling Rational Agents The Consistency View Of Rationality And The Changing Image Of Neoclassical Economics," Cahiers d’économie politique / Papers in Political Economy, L'Harmattan, issue 49, pages 177-208.
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    Cited by:

    1. Saverio M. Fratini & Alessia Naccarato, 2016. "The Gravitation of Market Prices as A Stochastic Process," Metroeconomica, Wiley Blackwell, vol. 67(4), pages 698-716, November.
    2. Signorino, Rodolfo, 2011. "David Ricardo on natural and market prices," MPRA Paper 39212, University Library of Munich, Germany.
    3. repec:elg:eechap:13938_6 is not listed on IDEAS
    4. Neri Salvadori & Rodolfo Signorino, 2016. "Competition," Chapters,in: Handbook on the History of Economic Analysis Volume III, chapter 6, pages 70-81 Edward Elgar Publishing.
      • Salvadori, Neri & Signorino, Rodolfo, 2011. "Competition," MPRA Paper 38387, University Library of Munich, Germany.

    More about this item

    Keywords

    classical economics; market disequilibrium; competition; Adam Smith; Karl Marx; Bertrand competition models;

    JEL classification:

    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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