David R. Henderson  

Are Competition and Cooperation Opposites?

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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."


This is from "The Blurry Line between Competition and Cooperation," Econlib Feature article for February, released moments ago. The author is a first-time author for this site: Timothy Taylor, managing editor of the American Economic Association's Journal of Economic Perspectives.

This would make a good reading for microeconomics courses in which professors want to get across the nature of competition. Read the whole thing.


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CATEGORIES: Competition




COMMENTS (6 to date)
Art Carden writes:

I've started putting it this way in class:

Suppliers compete with other suppliers to be able to cooperate with demanders.

Demanders compete with other demanders to be able to cooperate with suppliers.

I need to think through the different ways of framing it for commercial exchange (generally typified by persuasion) and for political exchange (generally typified by coercion).

Tom West writes:

A really like that quote.

I assume it's the same Timothy Taylor who writes The Conversable Economist, one of my other favourite economics blogs.

I find him to be quite even handed, never dismissing arguments, although perhaps occasionally weighing them rather differently than I do.

[broken url fixed--you put the blog title where the url should be and vice versa. --Econlib Ed.]

Ray Lopez writes:

Another author that stresses cooperation is 2009 Nobelist Elinor Ostrom in "Governing The Commons". She shows that the classic "tragedy of the commons" or bad result in the "prisoners dilemma" only happens when there's no communication (cooperation) between the parties. To pick a simple example on this theme: in an unmoderated blog (not this one which is moderated) I could use swear words and make an ass out of myself, but I don't (or what am I missing?), because I would lose credibility, even though I get nothing for blogging save expressing my opinion credibly. Like the Maghribi merchants or Champagne fairs of yesteryear, it sometimes pays to cooperate long term more than to try and get an immediate payoff today.

I've been the proprietor of a small business, residential building, and never while in that role did I think of myself as competing with other builders. I saw opportunity. Prices, for both houses and the factors of production, suggested with some calculation that I could do something I wanted to do. So I did it (making enough to keep myself afloat).

Competition exists, it seems to me, principally in the eyes of economists and others who have learned to look at affairs in that light. It is a learned perception. Microeconomics seems to teach observers to see more competition on the field of life than most actors on that field feel, I claim.

Cooperation is the dominant factor in producing the wealth that we share, as I am trying to make clear in a blog named Perceived Order.

Andrew_FL writes:

Competition is when when producers cooperate with consumers. Collaboration is when producers cooperate with each other (and consumers with each other). Cooperation always benefits the in-group (or else they wouldn't engage in it) but sometimes harms the out-group, although it's also sometimes benefits the out-group. But in cases where cooperation harms the out-group, the out-group itself can become a countering cooperative in-group. The result is that voluntary cooperation is generally beneficial for everyone.

Coercion is in a category by itself, and is not properly cooperation of any kind. Coercion involves things that superficially may look like cooperation, but do not benefit all members of the "in-group" since some members of the in-group are compelled to participate whether they benefit or not. Additionally, collaboration with a party legally allowed to engage in coercion, will always be harmful to the out-group, because, being not legally able to counter the coercive party, they are at a disadvantage to that collaborative in-group.

Daublin writes:

It's a great perspective, one that I think deserves wider attention.

An analogy I find helpful is dating. Think about finding a business partner--for anything from starting a business to buying a taco--and think about the laws and norms that apply. Then see if the same thing applies if it were a romantic interaction rather than a business one.

Like you describe for business interactions, the dating scene is extraordinarily competitive. Yet, each individual interaction is voluntary. Each individual action does no overt harm to anyone else, just like declining to hire someone does no direct harm to them.

In the dating scene, people are openly racist, ageist, sexist, and prejudicial in just about every way you could possibly imagine. Nobody seems bothered by this, and for that reason, I wonder if it's *fundamentally* immoral to be the same way in business transactions. Yes, it's possibly inefficient... possibly, but not obviously. If you have nothing else to go on, it doesn't seem either immoral or incorrect to select a taco stand where the proprietors look Hispanic.

Nobody wants dating sites to forbid listing race and gender preferences. Maybe it should be legal in California to list race and gender preferences when looking for a roommate. It's a business transaction, but business is intimate in its own way.

Nobody wants to extract a dating tax from the dinner tab, much less to add an extra tariff if one of the participants is a foreigner. Maybe it would be better to have flatter, simpler taxes in the business world, instead of constantly tinkering with categories of activities that should get a little higher or lower tax rate.

Certain laws *do* apply to romantic dates. Even on a date, this last haven of libertarianism in the modern world, it's flagrantly illegal to steal from or assault the other person. As such, these categories of law seem more fundamentally important to our society than do the ones that only apply to business interactions.

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