Entrepreneur and venture capitalist Peter Thiel has an interesting Wall Street Journal piece on innovation, firm growth, and market structure, misleadingly titled “Competition Is for Losers.” Thiel’s essay is ostensibly about the defense of “monopoly” -- the large market shares achieved by successful firms — over “competition,” by which he means perfect competition, the neoclassical economist’s fantasy world in which tiny, identical firms exist in a kind of stasis, not doing anything and not earning any economic profits.
Actually, without meaning to, Thiel gives us a thorough and persuasive critique of mainstream monopoly theory and its bizarre, counterintuitive, and misleading concepts of “monopoly” and “competition.” The business behaviors Thiel praises — innovating, creating economic value, out-competing rivals, and increasing sales and profits — are thoroughly competitive, in the Austrian (and common-sense) notion of of competition. If Thiel had followed the Austrians in defining competition as the absence of legal restraints on entry and exit, he could framed his essay as an explanation of how innovation and entrepreneurship benefit society, rather than making it look like a critique of competition per se. A better title: “Perfect Competition Theory Is for Losers.”
