Economic Theories. the Liberal View of Competition

1170 Words5 Pages
Answer the Following Questions Based on Balaam and Dillman, Chs. 1-4. Compare and contrast the liberal view of competition, as found in Adam Smith’s invisible hand, with the mercantilist view of competition. What accounts for the differences between the two views? Explain. Answer: Competition, in economics, is defined as the rivalry in which every seller tries to get what other sellers are seeking at the same time: sales, profit, and market share by offering the best practicable combination of price, quality, and service. Under the liberal view of Adam Smith, Competiton is seen as the phenomenon that regulates the economic activity. Under this doctrine, the consumers are motivted by his individual choices and interests. Thus, Competition in Liberalism means that the markets should represent all the interests of the consumers and by achieving that, the society will benefit of the abundant choices. Here the personal interests wills serve other indiviuals in the market and, the diversity or the number of competitors. And this is how the Competition is regulated, bye pursuing the individual self interests. This is just one view that is explained in the book "International Political Economy". There is another view or definition of Competition under the Mercantilist economic theory. In Mercantilism, it is the State that regulates the markets, not the individuals. Therefore, mercantilists see competition as something that the State promotes and not benefits can be obtained without its intervention. Also, mercantilist states decide to allow free trade and open markets (competition) only "when those objectives coincide with state national interests", as the book mentions. It is, therefore, a decision made by the State to promote Competition. When comparing the similarities between the two views of competition, both Liberalism and Mercantilism consider Competition
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