capitalist competition

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

I heard stories on US National Public Radio this morning on alleged
"doping" of Olympic athletes in both the US and Australia (while it happens
in other countries, according to most observers). So I dredged up and
edited the following, from an old unpublished ms. of mine. It should be
kept in mind when we think about Hayek-type paeans to competition and
entrepreneurship.

Capitalist competition is like that of professional weight-lifters. In the
absence of central constraints, each of the athletes invest in anabolic
steroids in order to gain a relative advantage (what Frank and Cook [in
their 1995 _Winner-Take-All Society_] call "positional investment").
(Crucially, it should be noted that this competition is not of the NC sort
embraced by Okishio, since it involves individuals competing _relative to_
each other, so that relative position matters. Austrian economists also
lack a notion of that relative position matters in competition.) Those who
do not take the drug increasingly find that they are losing to those who do
so, and must choose to either join in drug abuse or lose the game. In the
end, most of the advantage gained by the weaker athletes is lost when the
stronger also start taking steroids, while there are only three winners (if
we include silver and bronze medals). Among other things, this implies that
the jockeying for relative advantage continues, along with its side-effects.

This story is often summarized by the phrase "pecuniary externalities" or
"cut-throat competition," while Frank and Cook call it a "winner take all
market." (In one version of Marxism, the rising "organic composition of
capital" is analogous to the collective self-abuse using steroids described
here.) Given the negative side-effects of steroids, this competition is
self-destructive, both to the group and the individuals [cf. Hoberman,
1991, _Mortal Engines_]. In this story, investment in gaining relative
position would raise the denominator of the rate of profit, while not
increasing -- and possibly hurting -- the numerator for the "industry" as a
whole. So we have a rudimentary theory of the falling rate of profit.
Switching analogies in mid-stream, the capitalists foul their own nest:
crises are endogenous in origin, unlike in liberal thought, which relies on
exogenous shocks alone.

It is true that there exist other forms of investment (as in training) that
would not lead to the results sketched here, but if both types of
investment are available, the individual incentive is to invest in both
drugs and training (diversifying, of course). To the extent that steroids
are available, we should expect the results sketched here.
Jim Devine jdevine@xxxxxxx & http://bellarmine.lmu.edu/~JDevine