Why full blown competition is not the answer

If you haven’t already, you should probably watch this video. To state the obvious, the video presents a satirical, extreme version of some areas in the US. Particularly the big metropolitan areas like New York, or San Francisco/Silicon Valley.

Competition, is it good? Should all resources be given to people based on competition? Is competition really fair?  So we know that without competition there is no incentives to push ourselves to create ever bigger things. The stanched economies of USSR, Cuba and North Korea has proven that at least that type of communism does not lead to a more prosperous nation. However the real question is whether to abandon every and all communist ideas. Whether competition alone driving every decision would be the best for any society.

The answer is no. Letting competition drive all of societies incentives and regulations would be a disaster. There are many problems to this idea, however the biggest is the fact that competition is unstable at equal allocation of resources. Competition is like balancing a pencil on a table. If we were to put two players in an economic competition, a small advantage for one of them will lead to an ever increasing difference between both. The more resources one has, the more it can invest to be better, and so the further away it can go. Stability is only reached once either side has acquired all the disputable market.

In other words, unbounded competition leads to monopolies. And monopolies are not only bad for competitors, but for the society in general. Once a monopoly acquires sufficient market, it can lower its standards without any fear of competitors ever taking away market share.

While monopolies are probably the worst part about it, I should also mention the fact that excessive competition leads to stress, a lot of it. A stressed out society living on pills and other drugs to alleviate the anxiety is not healthy. If on top of that you add expensive healthcare, then people’s standard of living gets reduced significantly.

Competition is great in good levels, it is a sign of life and it drives further than we ever imagined. However leaving it alone to competition leads to unhealthy societies. Like an overheated motor, high competition in societies starts to be detrimental after some threshold.

Now a counter argument is that competition is natural. Competition is the way of life. We can see it in plants, we can see it animals. Why are we so surprised to see it in humans? The problem is that unbounded competition is a trait of uncivilized societies. So why do we need civilized societies? Not only because the general standard of living is much better, but in the long term civilized societies lead to much better performances. The resources wasted in inefficient monopolies, and distributed security enforcement are detrimental to the long term economic performance of a society. Besides we are intelligent enough to grasp these topics. Are we not intelligent enough to go beyond what we see in nature?