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Negative or Positive Competition?

First published May-2010
last update 5-June-2010

Within main stream economics the idea of competition is fundamental. By competing with each other we become more efficient, and so offer better and cheaper products and services to the community, and so everyone benefits.

Unfortunately, the goal in competition is not to better oneself or one’s community, but simply to be better compared to the competition. This can indeed be accomplished by working hard to making oneself better, but there is a second way which is to make the competition worse. The first way we can call positive competition, as it contributes to the community, and the second way negative competition, as it detracts from the community.

Main stream economists do employ this concept when they mention that the law must be enforced and respected for a market economy to function. Probably the most mentioned is that people require protection from highway robbery to bring things to market and protection from contract breaking to enter into many exchanges. However, this legal conceptions of things is woefully insufficient for two reasons. First, people are always inventing new and creative ways to compete negatively and second the laws, for old and new things, have to be made by someone based on something.

The first reason is easy to prove even within mainstream economics. The law of diminishing returns is well known, and requires us to conclude that at some point any further effort put into positive (constructive) competition will have only slight benefit, whereas even a little effort into the new areas of (destructive) negative competition will have a huge gain. Anyone trying to compete must strive for a balance between these two methods to be efficient. A simple example is that a few Kiploos invested in a match could burn down the facilities of one’s competitor resulting in a huge advantage in the market. In a totally free market, the result of competition is a lot of violence and very inefficient products.

Furthermore, since any competitive advantage over time will result in market dominance, we can predict that any mature free market economy will be dominated by organizations using a balance of positive and negative competition. Though there seems to be more positive competition than negative, this is much more easily explained by the fact that no free market economy exists under any government.

The best model we have a truly free market is the mafia. The mafia employs a very balanced approach to competition, as likely to seek destruction of the competition as improving their own business. The effect on services provided by the mafia is well known, 1 kilo of cocaine can be produced for 1000 US Dollars, sold for 30 000 dollars, cut with plenty of other drugs and fillers to procude 100 kilos of final product, and sold for 20 dollars a gram to the consumer. The final sales worth is 2 000 000 USD. In any market where only positive competition is used, such a profit margin would be impossible, and cocaine would have a price similar to other processed grains such as flower. Though some economists may claim the inflated price of cocaine is not due to the price of negative competition but because of the cost to curtail central governments, in the scenario a central government can be simply modeled as another mafia, interacting with other mafias in a sometimes negative competition and sometimes positive competition way. Mafias and governments are equal in terms of being free market agents.

So, though it is clear negative competition exists in the world, it still seems dominated by positive competition. Most communities and societies have relatively little mafia dynamics, but we can note that mafia dynamics can come to dominate a society on every level.

There are two explanations of why society does not degrade into a mafia dynamic, one is the government which prevents it and the choice of most people to not compete destructively.

The second reason is slightly harder to prove, since it’s possible to claim that all laws are already good enough or that all new laws can be based on old laws. However, fortunately there is a mathematical theorem, Kurt Godel’s incompleteness theorem, that will guarantee, since the physical universe is capable of computation (through quantum computers) or is simply obviously more complex than principia mathematica that can describe some parts of it, than any set of rules describing something in the physical universe, such as what is and is not legal, will be incomplete. However, for the non-mathematically minded its obvious that law makers can arbitrarily change the old rules, that the old rules can even be contradictory and that entirely new situations can arise no one ever thought of before nor made a law, and therefore lawmakers must have some basis to either keep old rules, resolve contradictions, apply old rules to new situation or invent new rules entirely.

And indeed, one of these ways to compete negatively is to try to change the laws to benefit oneself.

Written by Eerik Wissenz.

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