Public Policy to Promote Competition

Capitalism-driven governments (i.e. pretty much the entire world now, 'cept you, North Korea) generally like to promote market competition. In the same way that the Olympics creates competition, leading to the greatest swimmers, runners, and racewalkers of our time, market competition should lead to innovation. More stuff, better stuff, better for the economy.

Competition is also good for the economy since it encourages firms to cut costs and lower prices, so consumers will buy, buy, buy. On the extreme opposite end of the spectrum, we have monopolies. While firms in a competitive market are incentivized to up their game to survive, monopolies are only incentivized to up their prices...and restrict supply. They make more money that way. And not all monopolies are bad: think busses and utilities, which are “natural monopolies” for a good reason.

The government uses public policy...their discretion and power...to promote competition where they see fit. As firms get bigger and bigger, globbing up together via mergers, antitrust laws are coming up more and more often. Antitrust laws are laws designed to promote competition and prevent price setting, collusion, and monopolies.

Public policy is where discretion comes in. For instance, the natural monopolies aren’t things the government wants to break up. Instead of looking to antitrust laws and measures, the government regulates natural monopolies. They want to make sure prices aren’t too high, supply is high enough, and quality isn’t cut from a lack of competition.

Now, back to our regular programming: racewalkers FTW!