Two Traditions in the Conceptualisation of Competition

This article adopts a history of economic thought approach in examining the conceptualisation of competition and its development and role in different theoretical systems. Taking the nonlinear view of knowledge, this article identifies two distinct and different theoretical systems—classical political economy and neoclassical economics (brought through the marginalist revolution in the late 19th century). This article argues that classical political economy had a notion of competition as a dynamic process irrespective of the market structure (number of participants in the market). For classical economists, competition was conceptualised as the perfect mobility of resources, establishing a tendency towards uniform prices or rates of return to commodities, assets and labour that are identical in all economically relevant respects. Competition was operationalised through the theoretical idea of natural prices; in fact, competition is the method of abstraction employed by classical economists to study basic economic processes. Meanwhile, in neoclassical economics, the concept of perfect competition depends on the number of participants in the market, with imperfections introduced only as deviations from the idealised benchmark.