David R. Henderson  

You Nasty Creators of Consumer Surplus

Mr. Krugman's peculiar post... How I Teach When I Really
Longtime partners Alaska Air Group Inc. and Delta Air Lines Inc. are slugging it out in a battle for Seattle that is turning into one of the U.S. airline industry's nastiest turf wars in years.
So reads the opening paragraph of a news story by Susan Carey in the June 30 print edition of the Wall Street Journal. The print story is titled "Delta, Alaska Air Wage the Battle of Seattle." The on-line version is titled "Delta, Alaska Airlines Go to War Over Seattle."

"Nastiest," "turf wars," "delivered a jab," and "feuds" all appear in the piece. Over the years, I've noticed that many news stories about the competitive process use the language of battle. It is true that when company A starts to compete more with company B, company B is hurt.

But there are two interesting things to note. First, the competition is peaceful. How does Delta compete? By cutting off a horse's head and putting it in the bed of the CEO of Alaska Air? No. It competes by offering more flights and by cutting fares. That's not a battle or a war.

That leads to the second point. When Delta cuts fares, an important group of people whom Ms. Carey doesn't say much about wins big: that group is passengers. I'm sure she understands that, and knows that most of her readers will also understand. Still, it's interesting that this "feud" with "jabs" and "turf wars" is simply a peaceful process that helps consumers.

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COMMENTS (5 to date)
Julien Couvreur writes:

Paul Rubin in "Emporiophobia" and Don Boudreaux in a following post made this point quite eloquently: economists tend to talk a lot about competition, but it is competition for cooperation (who can cooperate best with consumers). This is hardly war.


"The fundamental economic unit is the transaction and transactions are cooperative. The benefit of a market economy, increased consumer surplus, comes from cooperation through transactions, not from competition. Competition in a market economy is competition for the right to cooperate. Competition is important because it guarantees that the best cooperators will win and because it establishes the efficient terms for cooperation, but cooperation is fundamental."

David R. Henderson writes:

@Julien Couvreur,
Nice. Thanks.

Anthony Bullard writes:


Thanks for reminding me of that post. That is such an important insight that gets looked over all the time. I wonder if a society further along the McCloskeyan path of bourgeois virtue promulgation would stop using such rhetoric, and exactly how far down that path that would be. It would surely change popular conceptions of free enterprise.

Greg Heslop writes:

It is interesting to note that even if the competitors in the news story competed by literally delivering jabs or otherwise tried to eliminate one another by force, the "cut-throat" aspect vanishes completely under the classic, atomistic version of competition with many, many competitors, because if one firm succeeded in eliminating another firm, there would still be as many left.

If the war-like terms in the news story were proper to describe the situation in Seattle, they still would not apply to more severe competition.

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