Effective competition is a concept first proposed by
John Maurice Clark
John Maurice Clark (1884–1963) was an American economist whose work combined the rigor of traditional economic analysis with an "institutionalist" attitude. Clark was a pioneer in developing the notion of workable competition and the theoret ...
, then under the name of "workable competition," as a "workable" alternative to the
economic theory
Economics () is a behavioral science that studies the production, distribution, and consumption of goods and services.
Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics anal ...
of
perfect competition
In economics, specifically general equilibrium theory, a perfect market, also known as an atomistic market, is defined by several idealizing conditions, collectively called perfect competition, or atomistic competition. In Economic model, theoret ...
, as perfect competition is seldom observed in the real world.
His proposal resulted in extensive debate in the economic literature over the next several decades in which
George W. Stocking Sr.,
George Stigler
George Joseph Stigler (; January 17, 1911 – December 1, 1991) was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics.
Early life and e ...
,
Jesse W. Markham,
Joe S. Bain, and many others participated. No consensus has yet been reached over which of many potential criteria should be used to judge competition to be effective, but as an alternative to identifying specific structural criteria by which to constitute effectiveness or workability,
Jesse W. Markham suggested the following definition:
An industry may be judged to be workably competitive when, after the structural characteristics of its market and the dynamic forces that shaped them have been thoroughly examined, there is no clearly indicated change than can be effected through public policy measures that would result in greater social gains than social losses.
Despite the lack of consensus in the literature, the concept is often used in
antitrust
Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...
enforcement and
public policy
Public policy is an institutionalized proposal or a Group decision-making, decided set of elements like laws, regulations, guidelines, and actions to Problem solving, solve or address relevant and problematic social issues, guided by a conceptio ...
analysis, as a method for measuring and ensuring adequate levels of competitive performance in markets which may not be ideally structured. Charles F. Phillips Jr. noted, "Workable or effective competition may result from conditions that are less exacting than those demanded for perfection."
[Phillips, Jr., Charles F. (1969) ''The Economics of Regulation: Theory and Practice in the Transportation and Public Utility Industries.'' Richard D. Irwin, Inc.]
References
{{Authority control
Imperfect competition
Management cybernetics