ABSTRACT
This chapter argues that economic competition has more in common with other competitive activities in life than it has with economists' standard conceptualization of economic competition. More generally, we argue that the theory of perfect competition denies the very reality it purports to study, is a poor predictive theory and is untenable in normative analysis. Theorists argue that perfect competition teaches us about important relationships among economic variables in competitive equilibrium and about certain normative properties of equilibrium. Perfect competition is a theory of states, not of processes; it tells us nothing about the adjustment from one competitive equilibrium state to another. Empirical knowledge consists of information of temporary and fleeting significance, which may be factual only so long as others do not also know it. Thus, tacit knowledge may take the form of a skill or may be embodied in a custom or unarticulated rule of behavior.
