Wednesday, 22 September 2010

234 year old revelation makes news

One of the many things that annoy me about present-day society is the way the media devote so much time in the so called "news" programmes on speculating on what is going to happen or be said rather than what has actually happened or been said. So Vince Cable hasn't actually said it yet, but is allegedly going to say:"capitalism kills competition when it can."

Why this statement, familiar to any student of "A" level economics (it's an aspect of what is now called "market failure") should cause consternation is baffling. Adam Smith was possibly not the first person to recognise this truth, but probably expressed it most vividly when over two centuries ago he wrote:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." (Wealth of Nations, Published 1776, page 116 of Everyman's Library edition.)

(It is perhaps a sign of the times that more recent sixth form studnts seem to have been less interested in the economic significance of the observation and more in the exact form the "merriment" might take. I suggested pork pies and brown ale, but their conjectures were more exotic.)

So Cable's comments are not Marxist, as some commentators on the BBC's "Today" programme are claiming, but from the mouth of the economist now claimed as the guru of the right. The Adam Smith Institute is highly selective in the prescriptions they choose to adopt from the master.

Just as it was, to Jane Austen, "(a) truth universally acknowledged , that a single man in possession of a good fortune, must be in search of a wife" it is universally recognised by impartial observers of the workings of the market that entrepreneurs prefer collusion to competition. In the 21st Century and the days of massive international corporations (News Corporation?) it is more than ever the government's responsibility to regulate not just the banks but the market itself to ensure where appropriate that producers and providers practise the competition they vaunt but do their best to avoid.

All power to Vince's elbow.

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