Classical Competition In Economics

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Classical economists were steadfast proponents of the markets, contending markets without interference can naturally maximize both individual and public interests. The economic orders that benefit the whole society emerge as the unconscious result of actions and voluntary transactions of each individual (Friedman & Friedman 2011). Competition within market is positive, through which the pursuit of self-interests by individual, the basic unit of society, can generate the socially beneficial outcome. The reason is that producers would strive to increase efficiency and decrease the cost of production, in their attempts to augment personal profit, thus the price of commodities would be kept low and resources are ensured to be used in the most …show more content…
Similarly, the price system is able to conciliate, resolve conflict and assure the efficient allocation of resources, conforming to neoclassical economists. Indeed, neoclassical school advanced the classical idea, arguing that as long as the actions seeking the maximisation of utility is free from coercion, the result will certainly be win-win situation between exchangers (Stilwell, 2011). The presumed ideal market structure is the perfect competition, which would occur when many sellers supply substitutable products and none of them possesses market power to manipulate the price. New firms could also freely enter the market. In this situation, only adopting the most efficient methods of production and produce at optimum output level can the manufacturers survive (Stilwell, 2011). Consumers who have access to goods at the lowest price will be the beneficiaries, since when the number of firms is large enough, the selling price of commodity will be the same as their marginal cost (Tsoulfidis, 2011). Meanwhile, all firms are making reasonable normal profits. In this circumstance, market actually generates harmony among the competing interests. However, the realistic market structures are deviations of it. Differing from the attributes of products and degree of market power, monopoly, oligopoly and monopolistic competition in …show more content…
The objective existence of economic power cause reality that income is determined by power rather than marginal productivity assumed by neoclassical theory. Thereby it is necessary to reconsider the minimum wage policy rejected by the two school. Some redistributive role for government is supposed to be warranted (Stilwell, 2011). There are clear evidences to support the claim that in the absence of state interference, the private sectors are unlikely to concern wage bargaining (Twomey, 2012). Surprisingly, according to Plowman and Perryer (2010), Adam Smith viewed as the champion of anti-government free markets, may have endorsed the implement of minimum wage policy. Smith stressed the indispensability of the subsistence wage, which should at least maintain the workers living by the work sufficiently, otherwise their inability of bringing up the family may result in the failure of racial heritage. Besides, Smith also discreetly noted that the actual living standards are based on real wages which are constantly influenced by the price of commodities, rather than money wages (Plowman and Perryer, 2010). Obviously, the quality of life would be eroded if general cost exceed wages massively. In practice, nowadays, as a country with a substantial and even growing number of immigrants, Australia is confronted with severe exploitation in diverse ways towards migrant workers,

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