PFF's recent work on standards, in connection with Digital Europe, has noted the creativity of private firms and standard setting organizations, and has urged that governments avoid messing it up. We concluded: "It is crucial that law and policy makers look hard at what the people in the arena are doing, and adapt law and policy to business culture and business necessities, rather than the reverse."

Economist Lynn Kiesling, who participates regularly in PFF's Institute for Regulatory Economics, recently posted some similar thoughts on the superiority of "organic competition . . . the development of institutions supporting exchange (i.e., markets and the rules that govern them) through the interaction and mutual interest of potential buyers and sellers," and that "arises spontaneously from human action and economic evolution based on choices and change over time."

Kiesling contrasts this with "ordered competition," which is " competition engineered, controlled and managed to approximate some idealized notion of competition," and posits: "All other things equal, organic competition outperforms ordered/managed competition in delivering long-run dynamic benefits to both consumers and producers and in increasing total surplus."

One of her points:

[N]ote that the concept of markets that I use here is one in which markets are primarily human institutions of trial-and-error learning processes, not one in which markets are mechanisms for the allocation of resources. This idea is basically a corollary to the "perfect competition" point made above. While obviously one of the consequences of market processes and prices as transmittors of information is that resources get allocated to their highest-value uses, I do not start from the claim that market processes are designed specifically as resource allocation mechanisms.

posted by James DeLong @ 12:53 PM | Standards

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