In relation to the question 'Why is the economy called "competitive" when it is actually cooperative?', see also Allyn Young's entry on Economics for the Encyclopaedia Britannica (1929). There he captures the essence of Smith's insight, in The Wealth of Nations, on the inextricable link between competition and cooperation:
       "Although the book is the most powerful brief ever formulated for unimpeded trade, neither hampered nor coddled by governments, its greatest importance is not to be found in that circumstance, but in the general picture, at once simple and comprehensive, which it gives of the economic life of a nation. The apparent chaos of competition, the welter of buying and selling, are resolved or transmuted into an orderly system of economic co-operation by means of which the community's wants are supplied and its wealth increased."



In his 1928 presidential address before the British Association on "Increasing Returns and Economic Progress" Young extended Smith's insight that the wealth of nations - hence the aggregate extent of the market - depends reciprocally on the extent of the division of labour. He concludes with the "useful tautology" that "the division of labour is limited by the division of labour" in a cumulative process that depends vitally on the degree of competition and mobility.



Competition ensures that lower costs are passed on as lower prices and greater purchasing power. This impels a greater division and cooperation of labour within firms, as in Smith's pin factory, coordinated by their managers. But Young emphasised that division of labour increasingly takes the form of increasingly specialised firms integrated through the market with each other and with final consumers.



Mason Gaffney has usefully reminded us of Henry George's graphic description of "cooperation: its two kinds": (i) among a ship's highly specialised crew under unified command, and (ii) that involved in decentralised free markets. George has an equally graphic description of the making of the ship: a complex assembly of a huge variety of materials coming from outside in response to the demand. However, as Young explained, the price and variety of those inputs depends not only on the demand for that ship, nor even on the demand for ships in general, but also on the general increase in demand for similar materials and items by a variety of industries as the whole economy progresses. Therein, with competition and cooperation, lies the secret of self-sustaining macroeconomic growth.


Roger Sandilands