Competitive paradox

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As a paradox of competition is referred to in the national economy , the model a situation where the measures for a single business entity or a single unit competitive advantages , miss their target bid if all others do likewise. In some cases, the end state for everyone (together as well as for each individual) is even more unfavorable than before. The term competition paradox was coined by the German economist Wolfgang Stützel . It is a case of a rationality trap . Stützel differentiates between three classes of competitive paradoxes : circulatory paradoxes, classic paradoxes and Marxian paradoxes .

Examples

advertising
The overall demand for detergents, for example, is stable. However, individual companies can use advertising to expand their market share at the expense of the competition. But if all detergent manufacturers do this, then advertising expenditure increases for everyone, so that profits even fall. The premise that advertising cannot effectively increase the total volume of detergent consumption is plausible.
Shop opening time
Assume that the legislature extends the permitted shop opening time by two hours. If a single shop now uses the new opening times, it has to pay more work, but it can also generate more sales and thus more profit. However, if all shops use the extended shop opening hours, customers can switch to other shops (with a similar range), and the turnover that is possible due to the customers' willingness to buy is again distributed across all (comparable) shops. However, the premise that the total turnover is constant regardless of the opening times of the shops is not mandatory: By extending shop opening times, for example, the shops could win back sales from online trading.
Wage policy
The following applies to each individual country: a restrained wage policy enables a country to improve its price competitiveness compared to other countries. However, it does not follow from this that if all states pursue a restrained wage policy at the same time, then all (can) improve their competitiveness.
Current account
A current account surplus is at the expense of a current account deficit of another state - to this extent, not all can improve their current account at the same time, on the contrary - if everyone begins to restrict their imports at the same time, the balance of their respective current account will ultimately decrease for all (see also protectionism in the 1930s: Smoot- Hawley Tariff Act ).
Currency devaluation
A single country that has its own currency can use currency devaluation to lower the prices of its export goods abroad. All states together cannot do this. If the states undercut each other in their devaluations, this creates the risk of a currency war with the consequence of a devaluation spiral .

Partial and global clause, lead and lag effect

Wolfgang Stützel specifically defines and differentiates validities that apply to individual economic subjects or individual groups (partial clause) and validities that apply to the entirety of economic subjects (global clause).

With regard to striving for export surpluses, he differentiates as follows:

Partial clause
A country can generate export surpluses by expanding its exports. A country can generate export surpluses by restricting its imports.
Global rate
The sum of exports is always equal to the sum of imports.

The advantage that individual economies would like to achieve for themselves (completely legitimately) is often shown in a macroeconomic view (aggregation) as a so-called advantage over the necessary lagging effects of others. If lagging effects are accepted, there is no competitive paradox. Only because individual supply and individual demand prove to be more elastic than total supply and total demand can the classic competitive paradox arise.

Criticism of reasoning and application

The model of the competitive paradox is often used by advocates of state regulation and opponents of liberalization measures. If the competitive paradox is used or understood in such a way that it argues against economic competition, it must be countered that inefficiencies are eliminated in competition and new, innovative products are created. At the level of individual markets, competition makes technical progress driven forward - even if the introduction of competition only means that everyone has to work harder without there being an increase in output.

literature

Individual evidence

  1. ^ Rolf-Dieter Grass, Wolfgang Stützel: Economics. Munich 1988, pp. 156-165
  2. ↑ Johannes Schmidt, 2012: Saving - Curse or Blessing? In: Basic normative and institutional questions of economics: Lessons from the crisis for macroeconomics. ( Memento of the original from October 23, 2013 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. (PDF; 125 kB) p. 12 f. @1@ 2Template: Webachiv / IABot / guthabenkrise.files.wordpress.com
  3. ↑ Wolfgang Stützel in: interest, credit and production. Tübingen 1952. Introduction by the editor. P. 9: "All countries want [...] to export more than they import. It is clear from the start that they will not achieve their goal. In principle, there are two possibilities here. Either all states actively promote exports and release imports: in a frenzy of international exchange, the total volume of exports will increase without anyone exporting more than they have imported. Or else, and that is the more likely and unfortunately always historically given: One will try to limit imports in order to gain an active current account balance. This means that no country can increase its exports any more. On the contrary. The general pursuit of a difference between export and import will cause the total exchange volume to decrease cumulatively. "
  4. ↑ Wolfgang Stützel: Paradoxes of the money and competitive economy. Aalen 1979. p. 403.
  5. ↑ Wolfgang Stützel: Paradoxes of the money and competitive economy. Aalen 1979. p. 404.
  6. ↑ Wolfgang Stützel: Paradoxes of the money and competitive economy. Aalen 1979. p. 369.
  7. ↑ Juergen Bernhard Donges, Barbara Dluhosch: The role of the state in a globalized economy. 1998, ISBN 978-3-8282-0058-6 , pp. 47-48 online