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The Fraser Institute, Essential Schumpeter: The Nature of Competition

Essential Schumpeter: The Nature of Competition

Welcome to the essential ideas of Joseph Schumpeter. As he so often did, Schumpeter

challenged the orthodoxy surrounding the concept of competition. In his view,

competition wasn't about the number of firms in a market, but rather how easily

new firms could enter the market and displace existing firms. For example:

Two islands are known for a cool treat – kiwi popsicles. On the eastern island there

are ten firms selling kiwi popsicles; on the western island only two large firms

sell kiwi popsicles. traditional economics tells us that the eastern

island is more competitive than the western island. But let's take a closer

look: On the eastern island, the government issues licenses for a certain

number of firms to produce a preset number of kiwi popsicles. Each firm goes

through a lengthy and costly application process, taking up to several years to

complete. There are also lengthy and expensive

regulatory reports that have to be filed with the government every year, adding

even more costs. And the government prohibits any foreign kiwi popsicles

from being imported to the island. The result of these protections is that the

firms able to obtain a license for Kiwi popsicles are able to charge higher

prices. Meanwhile on the western island, no restrictions are placed on the number

of firms or the importing of kiwi popsicles so new firms are able to

easily enter the market and compete with the existing two firms. This openness to

competition forces the two existing firms to keep prices low and to innovate

with new products - including different flavors and services like home delivery -

in order to stay ahead of any would-be competitors instead of worrying about

the number of existing firms and their market, Shumpeter realized we

should worry about barriers that prevent or limit new firms and entrepreneurs

from entering a market, and innovating and competing for more information on

Joseph Schumpeter visit EssentialSchumpeter.org and to learn about more

essential scholars visit EssentialScholars.org


Essential Schumpeter: The Nature of Competition Wesentlicher Schumpeter: Die Natur des Wettbewerbs Schumpeter esencial: La naturaleza de la competencia L'essentiel de Schumpeter : La nature de la concurrence Esminis Schumpeteris: Konkurencijos prigimtis Essential Schumpeter: Natura konkurencji O essencial de Schumpeter: A Natureza da Concorrência Эссенциальный Шумпетер: Природа конкуренции Essential Schumpeter: Rekabetin Doğası Сутність Шумпетера: Природа конкуренції 熊彼特要论竞争的本质 熊彼特精要:競爭的本質

Welcome to the essential ideas of Joseph Schumpeter. As he so often did, Schumpeter Willkommen bei den grundlegenden Ideen von Joseph Schumpeter. Wie so oft, hat Schumpeter Joseph Schumpeter'in temel fikirlerine hoş geldiniz. Sıklıkla yaptığı gibi, Schumpeter

challenged the orthodoxy surrounding the concept of competition. In his view, stellte die orthodoxe Auffassung über den Begriff des Wettbewerbs in Frage. Seiner Ansicht nach, zakwestionował ortodoksyjną koncepcję konkurencji. Jego zdaniem, поставив під сумнів ортодоксальність концепції конкуренції. На його думку, thách thức tính chính thống xung quanh khái niệm cạnh tranh. Theo quan điểm của ông,

competition wasn't about the number of firms in a market, but rather how easily

new firms could enter the market and displace existing firms. For example:

Two islands are known for a cool treat – kiwi popsicles. On the eastern island there Zwei Inseln sind für eine kühle Leckerei bekannt - Kiwi-Eis am Stiel. Auf der östlichen Insel gibt es Два острови відомі прохолодними ласощами - ківі-ескімо. На східному острові є

are ten firms selling kiwi popsicles; on the western island only two large firms

sell kiwi popsicles. traditional economics tells us that the eastern

island is more competitive than the western island. But let's take a closer є більш конкурентоспроможним, ніж західний острів. Але давайте розглянемо ближче

look: On the eastern island, the government issues licenses for a certain Дивись: На східному острові уряд видає ліцензії на певний вид діяльності

number of firms to produce a preset number of kiwi popsicles. Each firm goes Anzahl der Unternehmen, die eine bestimmte Anzahl von Kiwi-Eis am Stiel produzieren. Jede Firma geht кількість фірм, які повинні виготовити задану кількість ківі-ескімо. Кожна фірма виконує наступні дії

through a lengthy and costly application process, taking up to several years to durch ein langwieriges und kostspieliges Antragsverfahren, das bis zu mehreren Jahren dauern kann через тривалий і дорогий процес подання заявок, який може тривати до кількох років

complete. There are also lengthy and expensive vollständig. Es gibt auch langwierige und teure

regulatory reports that have to be filed with the government every year, adding Regulierungsberichte, die jedes Jahr bei der Regierung eingereicht werden müssen, und fügen hinzu

even more costs. And the government prohibits any foreign kiwi popsicles noch mehr Kosten. Und die Regierung verbietet alle ausländischen Kiwi-Eisbecher

from being imported to the island. The result of these protections is that the

firms able to obtain a license for Kiwi popsicles are able to charge higher Unternehmen, die eine Lizenz für Kiwi-Eis am Stiel erhalten, können höhere Preise verlangen фірми, які отримують ліцензію на виробництво ківі, можуть встановлювати вищі ціни

prices. Meanwhile on the western island, no restrictions are placed on the number Preise. Auf der westlichen Insel gibt es hingegen keine Beschränkungen für die Anzahl der ціни. Тим часом на західному острові немає обмежень на кількість

of firms or the importing of kiwi popsicles so new firms are able to von Unternehmen oder die Einfuhr von Kiwi-Eis am Stiel, damit neue Unternehmen in die Lage versetzt werden

easily enter the market and compete with the existing two firms. This openness to leicht in den Markt eintreten und mit den beiden bestehenden Unternehmen konkurrieren. Diese Offenheit für

competition forces the two existing firms to keep prices low and to innovate

with new products - including different flavors and services like home delivery -

in order to stay ahead of any would-be competitors instead of worrying about um den Konkurrenten voraus zu sein, anstatt sich um die

the number of existing firms and their market, Shumpeter realized we die Anzahl der bestehenden Firmen und deren Markt, erkannte Shumpeter, dass wir

should worry about barriers that prevent or limit new firms and entrepreneurs sollte sich um Hindernisse kümmern, die neue Unternehmen und Unternehmer behindern oder einschränken

from entering a market, and innovating and competing for more information on vom Eintritt in einen Markt abhalten, und Innovation und Wettbewerb um mehr Informationen über

Joseph Schumpeter visit EssentialSchumpeter.org and to learn about more

essential scholars visit EssentialScholars.org