Any economics textbook worthy of the name should explain the role of competition in
promoting efficiency and spurring the search for improved products and technologies. It
should also explore the implications of the absence of competition, i.e., monopoly. The
student should understand how the incentives and behavior of a monopolist differ from that
of a competitive firm.
A text that relies on the discredited model of "pure" or "perfect"
competitionsadly, a common error in spite of decades of withering criticism of the
conceptis seriously flawed. This model assumes that a competitive market is one in
which information is perfect and universal and every producer is too tiny to have an
impact on price. By this definition, every market will be found deficient no matter how
intense the competition between rival firms. Most economists today understand that the
pure or perfect competition model is a fantasy; an unfair yardstick against which to judge
the real-world marketplace.
Another pitfall to avoid is reinforcing the common notion that monopolies are easy to
create and maintain in a market with open entry. What history actually shows is that it is
risky and costly to try to monopolize a market with unrestricted entry. This is why those
who want to collude tend to use politics to stifle competition. The key to long-lasting
monopoly has always been protective government action.
The question of whether the government needs to regulate competition through the
Antitrust Division of the Federal Trade Commission should be critically examined, not
taken for granted. The student should understand that laws and regulations aimed at protecting
competition can be used to protect competitors against competition.