ABSTRACT
AFTER our discussion in the last chapter of the conditions of free competition, we can now proceed to analyze its efficiency. As in Chapter VIII, where we discussed the efficiency of an imaginary economy under perfect competition, we shall again be concerned with the whole economy rather than with individual markets. The reason for this is, again, the close interdependence of the efficiency of different sectors of the economy, which makes it impossible to say much about the efficiency of an isolated market unless one knows something about the organization and efficiency of the rest of the economy. Hence, we shall deal with the freely competitive economy, even though there is probably no such economy in existence today. For let us recall that the distinguishing feature of free competition is free entry—the free entry of persons to occupations and of firms to markets and industries. A freely competitive economy, therefore, would be one in which there are no trusts, no cartels, no unions, no professional associations, or any other forms of monopoly; and in which, in addition, neither the need for capital, nor economies of scale, nor consumers’ ignorance are important enough to create natural obstacles to entry.
