TUESDAY, 9 January 2024: The Center for Market Education is excited to announce the publication of “Competition, Innovation, and Concentration: A Nietzschean Essay in Honour of Paolo Sylos Labini” (https://marketedu.me/wp-content/uploads/2024/01/202401-EduPaper-9-Competition-Innovation-And-Concentration.pdf), written by CME CEO Dr. Carmelo Ferlito. This timely paper seeks to critique and dismantle the idea of perfect competition as presented in traditional economic textbooks and taught in economic classes, in favor of one in which competition is seen as a dynamic process where entrepreneurship plays a key role. Furthermore, the paper aims at demonstrating how the process of industrial concentration – and the subsequent formation of oligopolies – is not necessarily in contradiction with the market process, but often a result of it.

As noted by Dr. Ferlito, textbook definitions of perfect competition describe it as a state of affairs characterized as atomized, in which all products are homogenous, there is perfect knowledge of the technical and economic conditions of the moment, and which no firms can achieve extra profits in the long run. Dr. Ferlito critiques such a state as being the opposite of a real process of competition.

In this report, Dr. Ferlito seeks to provide an alternative idea of competition, where it is understood as a dynamic process unfolding over time rather than being something static and with a predetermined outcome. As well, Dr. Ferlito rejects the traditional understanding of competition as something impersonal, rather placing entrepreneurship at its centre. In doing so, he stresses that the competition process is not abstract but rather made up of the interactions between decisions taken by living human beings. 

Dr. Ferlito explains that “competition can be understood as a process of struggle between opposing forces”. Furthermore, it “is this constant struggle that animates competition with the Nietzschean conception of the Will to Power. The entrepreneur ultimately does not enter the market with the aim of becoming one among many, of being equal and homogeneous with respect to other entrepreneurs. On the contrary, the essence of entrepreneurship is the desire to get rid of competitors, not to homogenize with them, and the need to conquer market shares through winning strategies”.

As Dr. Ferlito argues, it is this Will to Power at the root of entrepreneurial action that can only bring about concentration as the natural result of a competitive process, leading to the rise of oligopolistic capitalism. This is not in contradiction with free markets and open international trade. Rather, the concentration of firms provides the necessary conditions for competition to survive and prosper by providing the necessary economies of scale.

An oligopolistic capitalism is thus the natural consequence of competition, not because, as Schumpeter argued, the entrepreneurial function gets exhausted, but rather because concentration is the necessary condition for it to survive and prosper, as shown in the following flow: