Competition Versus Competitive Equality in International Financial Markets

Abstract

Competitive markets generally benefit consumers and usually benefit society in general. When markets are competitive, consumers tend to get the kinds and qualities of goods and services they want. These things are produced by firms and people according to their comparative advantages in production and distribution. Competitive markets are said to be “fair” to consumers because they, rather than some “higher” authority, determine what is produced—subject to the consumers’ ability to pay, competing demands by other consumers, and the costs of production and distribution. Such markets are considered “fair” to producers because those who succeed are better at meeting consumers’ demands than those who fail. Competitive markets tend to increase a nation’s wealth because they are efficient allocatively and productively. That is, resources are used such that they result in the greatest output that can be achieved with existing technology. This occurs because competitive producers gain from shifting purchasing, selling, and using resources to the point where all advantages from changes are achieved (returns are equated at the margin).