Institutional Competition

Institutional Competition

New Thinking in Political Economy series

Edited by Andreas Bergh and Rolf Höijer

Why is competition between institutions usually viewed in a negative light, when competition is considered positive in most other economic contexts? The contributors to this volume introduce new perspectives on this issue, analytically and empirically exploring reasons for this perception.

Chapter 3: Learning Through Institutional Competition

Michael Wohlgemuth

Subjects: economics and finance, austrian economics, institutional economics


Michael Wohlgemuth Nothing is more favourable to the rise of politeness and learning than a number of neighbouring and independent states connected together by commerce and policy. David Hume (1742/1985: 119) 3.1 INTRODUCTION Why is it that the arts and sciences rose to such early and lasting heights in what is called ‘Western civilization’? Why have schools, universities, academies emerged and progressed in various parts of Europe – and with them democracy, commerce, and the rule of law? David Hume was amongst the first to ask that question and provide an answer that relates to ‘mutual jealousy’ between ‘neighbouring states’ that are ‘connected together by commerce and policy’ (Hume 1742/1985: 119). Greek antiquity provides an early example: Greece was a cluster of little principalities which soon became republics . . . Each city produced its several artists and philosophers . . . Their contention and debates sharpened the wits of men. A variety of objects was presented to the judgement, while each challenged the preference to the rest, and the sciences, not being dwarfed by the restraint of authority, were enabled to make such considerable shoots as are even at this time the objects of our admiration. (Ibid.: 120f.) According to this account two elements seem to have been most favourable to ‘sharpened wits of men’ or, for that matter, learning: variety and liberty.1 One could even attribute the ‘sharpened wits’ to only one causal factor that combines variety and liberty: competition. Competition as the peaceful rivalry and free mobility between a variety of free producers of...

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