Competition Overdose: How Free Market Mythology Transformed Us from Citizen Kings to Market Servants
In this short interview Ariel Ezrachi, Slaughter and May Professor of Competition Law, tells us about his recent book published in March 2020 - Competition Overdose: How Free Market Mythology Transformed Us from Citizen Kings to Market Servants.
1. Tell us about your book.
Can competition be toxic? And if so, who’s pushing this toxic competition? Those aren’t questions one hears in my field or generally. So, in our recent book, Competition Overdose, which HarperCollins published in 2020, Maurice Stucke and I look at these issues. Once we identified the factors of when competition can turn toxic, it was surprising how much toxic competition surrounds us and affects our lives - from the quality of meat in our burgers, the price we pay for hotels, or online manipulations. In the book, we show when and why policymakers rely on competition as the elixir for many problems, even when this harms society.
2. What prompted you to consider this problem?
Maurice and I taught, and spent our careers, promoting competition law and competition. If you look at many of today’s economies, a clear consensus emerges – an almost religious belief in competition as the key to our prosperity: if a business behaviour or law is pro-competitive, it’s inherently good; if anti-competitive, it’s presumptively bad. As a result, whatever illness our society suffers, competition is often held up as a cure. Our policymakers use a ‘magic formula’ – increase choice and competitive pressure and limit government intervention and expect market forces to sort it all out.
And yet, despite the promise of competition and prosperity, something isn’t right. Many of us are simply exhausted from competing. And we fear how our children will fare in a world in which competitive culture often results in a rat race.
What we found from our research - is that there are many different forms of competition – ranging from toxic to noble. And while we often face toxic competition (or the slightly better zero-sum variation), it doesn’t always have to be this way. Society can reorient competition to where it serves us, rather than our serving it, and where the nobler form of competition brings out our best rather than our worst.
3. Give us examples of toxic competition.
One interesting area is competition between education institutions. We looked at how rankings in the US, led several very prestigious universities to commit highly unethical practices. The competition is so toxic, that we even got Maurice’s dog to be recruited to apply to the top-ranked universities in the United States (full details in the book,…). We also look at the race-to-the-bottom between some of the leading schools in the UK, and how this toxic competition prompted some well-known public schools (like Eton and Winchester) to facilitate cheating to improve their ranking.
We also explore the effect of competition on quality. In principle, when markets work well, more competitive pressure will lead to higher quality and lower prices. And yet, intense competition can result in real degradation of quality. We found how, under certain market conditions, an increase in competition can lead to horsemeat in your burger, more water in your tomato sauce, and environmental and safety risks, including the horrible crashes of the Boeing 737 Max.
4. So who is pushing this toxic competition?
We identify several culprits, including the governments, who tend to over rely on market forces and sometime also use the competition ideal to liberalise services, even when it’s a bad idea. When we consider liberalisation, for example, we note how privatisation is often effective but has sometime been advanced to promote the interest of a few powerful firms or to shield the government from responsibility (all done with the promise of greater competition and efficiency). Our UK examples include the failed privatisation of forensic services (resulting in the recall of lab work samples used in over 10,000 criminal cases), the expensive privatisation of water supply (leading to massive debt, massive dividend allocation, and higher charges for water supply), and cream-skimming with the NHS.
5. Why is this research important?
We highlight a potential blind spot for many policymakers. Our key message is that the competitive process is a great tool, often beneficial for society, but it doesn’t always work and can backfire.
So rather than reflexively assume that more competition will solve most, if not all, problems, we wanted to inject a pause – a moment to consider the limits of competition, and read the warning on the label. Once you move from textbooks to the real world, competition can fail, more frequently than you might have originally thought.
We also wanted to understand how we can change the status quo. In reorienting competition to its nobler form, we can all benefit. We all have a role to play in facilitating change – the government, industry leaders, and us the consumers.
6. How was the book received?
When we started this project, we feared that we would be dismissed as two crazy Bolsheviks seeking to topple our economy. But early on, while writing the book, the feedback from the competition authorities and policy makers was very positive and helpful. The book was among Inc. magazine’s “New Business Books You Need to Read in 2020” and Publishers Weekly’s Top 10 Business & Economics books.