Portrait of Armen A. Alchian

Alchian on Competition and Coordinated Cooperation

Found in: Universal Economics

Starting with Adam Smith, the cornerstone of the field of study of economics has been the division of labor. Either by force, or voluntarily, human societies progressed to the extent that they were able to create institutions that allow individuals to cooperate with one another in the production of goods and services.

In primitive societies, most relations, including economic relations, were organized by involuntary arrangements, be that traditional forms of bondage, or any other subjection legally enforced such as slavery.

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The primary focus of economic analysis is on (a) competition in exchange of rights to services and goods and (b) coordinated cooperation in creating wealth. Competition by offers of exchange is a form of cooperation. “I’ll do this for you if you’ll do that for me—at better terms than someone else.” Though competing, we also cooperate—in the market, in the family, in firms, and in governments. We cooperate to make the “pie” larger; we compete over how much of the pie each of us gets. Any effective combination of cooperation and competition requires a control of the permissible types of competition so as to not obstruct social cohesion and cooperation. (FROM: COMPETITION, Competitive Cooperation by Exchanges)