Free Competition Is Voluntary Cooperation

Edward C. Harwood

[An essay written by E.C. Harwood in 1956. Reprinted from the American Institute for Economic Research bulletin, Research Reports, Vol. LIX, No.23, 7 December 1992]

From the viewpoint of anyone who is considering all the economic activities of a social group, "free competition" is another name for voluntary cooperation. This may seem a surprising statement, especially in modern times when many advocates of cooperative enterprise are criticizing competition and the profit motive. That cooperation is the opposite of competition seems to be generally assumed. However, careful analyses of the economic activities for which these words are names reveal that "free competition" and "voluntary cooperation" are two different names for the same economic behavior.

Sometimes the specific use of a word becomes plainer when placed in contrast with that which is not referred to. This step in the analysis is especially important for the word "competition" because it is so often associated with war. Phrases such as the "wasteful warfare of competitive enterprise" or the "commercial war" are common figures of speech. In order to avoid this seriously misleading association of ideas, the vital differences between free competition and war must be considered carefully.

Competition vs. War

Reference to any standard dictionary and brief consideration of the customary uses of these words facilitate explaining the association of competition and war. Webster's International Dictionary (Second Edition) includes in its definition of competition the following phrases: "the act of seeking what another is endeavoring to gain at the same time; common strife for the same object; strife for superiority; rivalry for a prize." The word "competition" is common in describing sporting events of one kind or another. In this connection, common usage speaks of the winner, perhaps identifying him as the recipient of a prize; and his rivals in the contest are said to have been defeated The words, win and lose, victory and defeat, also are associated with war. Armies march onto victory or defeat; and to the winner go the spoils of war, a circumstance that tends to make war even more closely associated with competition for prizes.

That most human beings have formed the habit of associating ideas long has been noted. Only those individuals who develop the additional habit of discrimination necessary for scientific analysis can successfully avoid the fallacies that may be introduced when conclusions are drawn from a careless association of ideas. Therefore, one can readily understand how the close association of such striking ideas as winning, losing, victory, and defeat should have encouraged the generally accepted notion that competition is analogous to war.

When a specific definition of war is used, the difference between it and competition becomes more clear. Webster's first definition of war is "the state or fact of exerting violence or force against another." In this connection, of course, "violence" is used in its most extreme sense. Every war that has been fought has proved again that there cannot be any Marquis of Queensberry rules for war.

Therefore, war is essentially different from free competition. In games, and even in the prize ring, unrestricted violence against the opponent is never permitted; whereas in war it is the accepted mode of conduct. As everyone knows who has trained soldiers for the battlefield, much of the training period is devoted to overcoming acquired habits of fair play, to teaching that a blow below the belt is not only permitted, but is essential to victory. What could possibly be farther removed from free competition?

The distinction between warfare and free competition becomes even more sharply defined when the dictionary's use of "competition" in connection with economic problems is considered. The definition is: "the effort of two or more parties, acting independently, to secure the custom of a third party by the offer of the most favorable terms." Restating the definition for war emphasizes the contrast: "state or fact of using violence against another." These more precise applications of terms reveal that writers who associate free competition with war seriously mislead their readers as well as themselves.

We know, then, that competition is not analogous to war, but that of course does not prove the opening assertion, "From the viewpoint of anyone who is considering all the economic activities of a social group, 'free competition' is another name for voluntary cooperation." Inasmuch as the behavior named "competition" has now been somewhat clarified, the next step is to analyze the actions described by the word "co-operation." Also to be made clear is the significance of "voluntary" as contrasted with "involuntary" cooperation.

Voluntary vs. Involuntary Competition

The word "cooperate" is simply defined as "to act or operate jointly with another or others," Usually a common objective is implied, such for example as their mutual benefit. Therefore, although two or more parties are involved in a war, the fact that all concerned are using violence against others does not make them joint operators in the sense in which those words are used in describing cooperation. Evidently, therefore, cooperation and competition have at least something in common, inasmuch as each excludes the idea of war.

We now consider what behavior is referred to by "voluntary" as contrasted with "involuntary" cooperation. Again the selection of certain notions that should be excluded will be helpful.

Except for a Robinson Crusoe cast upon a desert isle, or an occasional hermit who has wholly withdrawn from contact with his fellow men, all human beings must cooperate with their fellows to a certain minimum degree. The unalterable circum stances of man's existence force cooperation. In fact, the species would soon cease to exist if this minimum of cooperation, including cooperation between the sexes, were discontinued. For all practical purposes, therefore, every living individual must cooperate with others to some extent.

For the purposes of this discussion, analyzing what the minimum degree of cooperation must be at any particular time or place is not essential. We need only remember that the unalterable circumstances of man's existence force upon him some degree of cooperation. To cooperation required for the preservation of the race (such as the cooperation of a mother nursing her child) we apply the name "inevitable cooperation."

After the boundary of cooperation forced by unalterable circumstances is passed, customs, institutions, and laws established by men may face cooperation on the part of individuals. Such involuntary cooperation may be so extensive that virtually all the economic activities of men are prescribed by the state or other agency that forces the maximum degree of involuntary cooperation.

What Is Free Competition?

In an earlier section of this discussion, the phrase "free competition" was used repeatedly, but only competition was described. Inasmuch as the ideas suggested by the qualifying word "free" are essential to a clear understanding of the subject, description of what is meant by "free competition" is necessary.

Many writers who use this phrase "free competition" fail to realize that competition implies action in accordance with certain rules of procedure. Free competition, therefore, does not carry any implication of a "free for all" fight, with gouging, biting, lacking, and scratching all permitted. Evidently, the rules and regulations governing or affecting competition may tend to create a fair field with no favor; or they may, on the other hand, through the award of special privileges of one kind or another, give advantages to some that are denied to their fellows. The phrase "free competition" implies the former condition. "Free competition," therefore, implies that each individual concerned must of course comply with the rates, but that the rules, including all the customs, institutions, and laws of the social group, are such as to ensure a fair field with no favor. Furthermore, there is no implication that free competition has ever actually existed or does now exist in any locality. It may have existed in the past, may exist somewhere at present, and conceivably may exist in the future at some time or place, but the fact that it does not now exist in the United States, for example, does not lessen the usefulness of the notion for the purpose of this discussion.

Referring again to the economic behavior called "competition," we repeat the definition: "the effort of two or more parties, acting independently, to secure the custom of a third party by the offer of the most favorable terms." In other words, economic competition is the effort of two or more people to produce and offer a commodity or service for a third party on the most advantageous exchange basis from his point of view. In short, where there is free competition the competitors are striving to perform those economic functions that are most desirable from the viewpoint of the consumer, and of course nearly all of the consumers are likewise competitive producers. (In this connection, specialization or the division of labor not only increases the effectiveness of human effort but also raises to a higher level the minimum degree of cooperation required in an economic society.)

If now we enlarge our viewpoint, so that instead of considering only a few individuals, we regard the social group in its entirety, free competition is seen to be that situation in which men are voluntarily cooperating. All of the group, by purchasing what they prefer, encourage those best qualified to provide the desired economic things including services. Each of the group who is offering things in the markets voluntarily seeks to cooperate by performing in that economic role where he can most effectively serve his fellows and thereby maximize his own reward in the marketplace. In practical effect, under perfectly free competition, producers cooperate with consumers by endeavoring to provide (he best of whatever is desired at the least cost. Thus "competition" and "cooperation" become, under such conditions, merely different labels for the same highly efficient economic behavior.

Also important in this connection is the fact that the economic behavior we label "free competition" or 'Voluntary cooperation" results in the greatest possible total of benefits for all who participate. Unlike the competition in games where some lose what the victors win, and unlike war where even the winner may lose more than he gains, freely competitive economic behavior enables each participant participant to gain the greatest possible reward by voluntarily cooperating in a procedure whereby all concerned benefit.

One need only look about the world and observe conditions as they are to see the facts brought out in this discussion. In the early days of this country, when free land was available for the taking, the Nation was closer to a condition of perfectly free competition or voluntary cooperation than it is today. Perhaps the world's nearest approach to free competition or voluntary cooperation still is found in this country, in spite of the increasing interference with free competition that has resulted from the growth of special privilege and government intervention. In Russia, on the other hand, there is today [ 1956 - Ed.] nearly the opposite extreme. There is what was originally intended to be a fully cooperative society, but free competition has been nearly eliminated, and we find in its place involuntary cooperation, forced labor, in fact widespread slavery. Both careful reasoning and the obvious facts point to the same conclusion, that "free competition" is another name for voluntary cooperation, and that the elimination of free competition leads to a condition of involuntary cooperation, that is, slavery.

In this brief discussion we have not attempted to ascertain whether or not free competition is desirable. That, no doubt, depends on the results to be achieved, the personal desires of those who are involved, and many other factors. Once the public fully realizes that free competition is voluntary cooperation, much nonsense that has been written on the subject can be discarded; and a fresh start can be made in the consideration of pressing problems, with the confident expectation of more useful results.

Current Comment

Since E. C. Harwood wrote this luminous essay nearly 40 years ago, overt criticism of competitive economies has become muted. This would appear to be mainly a result of the collapse of command economies around the globe. Critics do continue to complain about economic conditions and to attribute many of the deficiencies they perceive to such hallmarks of competitive economies as private property and price-driven decision-making by individuals. However, because they no longer have any clear alternative to offer, they have been reduced to "Yes the market works, but what about...." The "what abouts" today may range from "poverty" in general (and "homelessness" in particular) to the "environment," or even vague concerns about a "lost sense of community" (which usually seems to amount to complaints from the well-born and/or highly credentialed that they do not have as much power as they feel they deserve).

In short it is now far more widely accepted that, as Col. Harwood put it, "... the economic behavior we label 'free competition' or 'voluntary cooperation results in the greatest possible total of benefits for all who participate," and the critics are left to complain about 1) the distribution of those benefits and 2) the effects of steps toward free competition.

Simplistically, the former concern prompts calls for additional special privileges and the latter involves opposition to the removal of such privileges. Efforts to impose or maintain special privileges are a "negative sum game," because the gains of the beneficiaries are less than the actual losses and/or lost opportunities imposed on everyone else. If truly free competition results in the greatest possible total benefits, then restricting the freedom of some participants by granting special privileges to others will reduce that total.

Efforts to gain or retain special privilege thus resemble another "negative sum game": physical combat. Perhaps as a result, the language of conflict ("trade wars," etc.) continues to intrude into discussions of the economy, and because of the continued confusion between the political and economic processes, we have yet to witness the "fresh start ... in the consideration of pressing problems" that was called for by E. C. Harwood so long ago.