Wednesday, November 02, 2011


The last two posts were about cooperation. Cooperation exists in all socio-economic systems. What matters is the way these two forces mix together.

The foundation of the free market is freedom. Free people are free to choose their relations. The result is that people free people end up competing on their ability to cooperate.

Not all cooperation is good. When Party A cooperates with Party B to exclude Party C from the market, they are engaged in an anti-market activity.

The word for this typle of activity is "collusion."

Please note. The problem here is not cooperation, but that they are engaged in antimarket activity. If Party A took it upon himself to exclude Party C from the market, then the activity is still negative.  When people cooperate in a promarket fashion they improve the competitive climate.

Classical thinkers sought to avoid paradox. Classical liberals realized that to preserve a free market one needs to actively prevent anti-market activities. The key to collusion is that the parties engaged in anti-market activity.

In contrast, let's look at the Wikipedia's definition of "collusion" [drawn 11/2/11]

"In the study of economics and market competition, collusion takes place within an industry when rival companies cooperate for their mutual benefit."
This definition labels any cooperation between competitors as collusion.
I wish to point out that this definition is both absurd and is anti-free market.

It is absurd to say that two people in the same industry cannot associate with each other because they are "competitors." A capenter is likely to have other carpenters as friends, and these friendships are likely to be mutually beneficial.

This definition is also anti-market.

Remember the key to the free market is freedom of association. Carpenters are free to associate with other carpenters. Programmers are free to geek out with other programmers.

When people of the same profession associate, they engage in mutually beneficial activities such as discussing best practices and industry standards.

Labeling cooperation among competitors as collusion is absurd. In a free society, people are free to have relations with other people ... even people in the same industry.

True collusion only occurs when groups engage in activities that activities that deny the rights of others. Professionals discussing best practices, standards and billing practices is not collusion. Price fixing is collusion because it denies consumers the right to negotiate price. Any activity to deny people market access is collusion.

The free market is a cooperative structure in which people are free to form their own associations.

Proponents of the free market must find ways to counter the false images projected onto freedom.

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