ABSTRACT
As the twentieth century nears its conclusion, economic policy-makers (if not the economic theory textbooks) have to a considerable extent come to recognize that the advantages of competition are to be found in the dynamics of the process of competition, rather than in the imagined state of affairs identified in the textbook model of competition. For most of the century, however, the general professional opinion was quite different. Any optimality properties a market system may possess, it was held, are those generated by its approximating the conditions of the perfectly competitive model. And the support for free markets which, it was generally understood, neoclassical economics (in its pre-1930 vintage) provided, rested (so ran the conventional wisdom during the central decades of this century) upon the dominant role played in neoclassical economics by the model of perfect competition. This chapter offers a brief survey of some significant milestones along the road which have led professional opinion away from these latter positions (emphasizing the role of perfect competition in achieving societal economic efficiency) towards the contemporary recognition of the greater relevance of the dynamic process of competition for an understanding of the achievements of free markets.
