Exchange in a Private Property Capitalist Economy
As previously stated in the pages of this book, the allocation of goods is a problem because of the fact of scarcity. Each time a person gets something, that much less is left for others; and each time a source is assigned to produce something, a little bit of something else is not produced. Every society has to face those two fundamental problems, which are fundamentally the questions of who gets what and who does what. And the desire for more utility leads to activity to resolve conflicts of interest; that is, desire for greater utility leads to competition. As long as we live in a world of scarcity we cannot reduce or eliminate competition. However, we can choose between alternative modes of competition. Different societies develop different institutions which, in turn, affect the answers to the questions who gets what and who does what. This and the following chapter discuss the effects of private ownership and contractual freedom on exchange and production, respectively.
KeywordsTransaction Cost Price Competition Private Ownership Efficient Allocation Enforcement Mechanism
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