Competition, Diversity and Economic Performance

Competition, Diversity and Economic Performance

Processes, Complexities and Ecological Similarities

Clement A. Tisdell

This thought-provoking book explores the influences of market competition and diverse behaviours of economic agents on economic performance, particularly dynamic economic performance.

Chapter 2: Concepts of economic competition and performance in context

Clement A. Tisdell

Subjects: economics and finance, evolutionary economics, industrial economics, environment, ecological economics


There is a common belief shared by many academics, business leaders and government officials that increased business competition promotes economic efficiency and stimulates economic growth, thereby making for less economic scarcity than otherwise. In other words, it produces more economic wealth than otherwise. These views were already expressed in Europe in 1776 by Adam Smith (1910 reprint) in his Wealth of Nations. The theoretical proof that perfect competition resulted in maximum economic efficiency (given a static universe and some particular assumptions) was not available until towards the end of the nineteenth century when it was formally demonstrated by Vilfredo Pareto (1896–97). He outlined the mathematical proof of the first fundamental theorem of welfare economics that, given specific assumptions, any perfectly competitive equilibrium results in a Pareto- optimal allocation of resources, that is, a situation in which it is impossible to make any individual better off without making another worse off. This approach assumes that economic efficiency is synonymous with static allocative efficiency.

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