Readings in Industrial Organization and Public Policy: Selected by a Committee of the American Economic Association

The paper has profited considerably from criticisms made by Professors George W. Stocking and Roland McKean of the Vanderbilt University economics department.

By JESSE W. MARKHAM^†

Economists, recognizing the shortcomings of the theory of perfect competition in framing public policy for oligopolistic markets, recently have endeavored to define a more realistic standard of economic performance -- workable or effective competition.¹ Since the concept owes its creation to a public policy need and not to the logic of abstract theory, it can, at best, be divorced only in part from value judgments. To the unswerving socialist, nothing short of complete government ownership and control of all economic activity may make for a workable society. To him, no economy is workably competitive if it is privately competitive. Yet a proponent of unlimited free enterprise would probably view any economy not subject to governmental intervention as workably competitive. Thorough-going antitrust sympathizers may reject any definition of workable competition that falls noticeably short of pure competition. On the other hand, economists who subscribe to the Schumpeterian theory of creative destruction may willingly accept, in fact, insist upon the acceptance of, far less. Nor is it quite clear that the degree of competition clamored for by constituents of each school of thought is always compatible with the economic framework of the society they hope to create or maintain. Those who insist that workable competition falls little short of perfect competition, in their efforts to preserve a free enterprise economy, may be unwittingly leading us toward stringent state controls. For, it is difficult to visualize the maintenance of atomized industries by any means other than strong police power. On the other hand, passive acceptance of a high degree of con