On the Optimality of the Competitive Process: Kimura's Theorem and Market Dynamics
This paper considers the optimality properties of a market economy in terms of three propositions that evaluate the outcomes of and the process of competition between a population of firms working within a given economic environment. We show that when firms differ in more than one competitive characteristic then competition does not select in general the most efficient firm nor does it always result in increases in the average efficiency with which resources are utilized. Drawing upon a theorem of Kimura, however, we show that competition has the property of maximizing the rate of change of the average selective characteristics in the population. We conclude that a more nuanced appraisal of the institutions of the competitive process is surely necessary. From an evolutionary standpoint, the outcomes of competition are always contingent on the nature of the selection environment and the characteristics of the whole population of firms that are being selected. Copyright Kluwer Academic Publishers 2002
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- R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 11-32.
- Elias Khalil, 2000. "Survival of the Most Foolish of Fools: The Limits of Evolutionary Selection Theory," Journal of Bioeconomics, Springer, vol. 2(3), pages 203-220, October.
- Cohen, Wesley M & Malerba, Franco, 2001. "Is the Tendency to Variation a Chief Cause of Progress?," Industrial and Corporate Change, Oxford University Press, vol. 10(3), pages 587-608, September.
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