Moral Limits to Economic Competition

Most social critiques of markets start from what profit-oriented behavior does to domains outside of the market proper (cf. Herzog 2013): it exploits workers and the vulnerable (Satz 2010), it corrupts moral values or the natural environment (Polanyi 1944, Sandel 2012) and undermines social ties and institutions. This paper however starts from the observation that one core feature within market economies has been surprisingly neglected by morally motivated critique: economic competition in general and competition between capitalist firms in particular. This is surprising because the consequences of the "creative destruction" are at first sight not very different from damages created by the use of direct physical violence which we tend to condemn morally (Simmel 1903): firm capital is destroyed, workforce is laid-off, entire cities or regions decay. While existing social critique has identified regions of morally noxious markets at the periphery of market economies, this paper presents an overview of moral arguments put forward to argue for and against the regulation of competition in markets. The paper does not only draw on arguments made by classical political economists and sociologists (Sismondi, Sella, Mill, Simmel, von Wiese, Keynes etc.) but also locates arguments in the discourse of actors in certain markets (traditional craftsmen, anti-trust cases, small challenging firms, shopkeepers, etc.). It identifies three competition-restricting moral arguments and their respective counter-arguments. (1) The main argument to be discussed is the individual-harm-argument. It states that competitive action contradicts the very basic ethical rule, even used by liberal philosophers to justify state intervention: thou shall not intentionally harm others (Mill 1859, Feinberg 1984). This argument is countered by four objections: (i) harm is outweighed by the long-term benefits; (ii) competitor are not responsible for the harm done but losing competitors or consumers are; (iii) competitors gave their consent to potentially harming each other; (iv) there is no wrongful intention to harm. (2) The encapsulated-competition argument points to the ruinous consequences that competition has for third parties or the general public (Etzioni 1988: 199). Much as certain fist fights or duels were outlawed in the 19^th-century because many societies considered this type of competition as more and more illegitimate, even if practiced according to fair rules, so objections have been raised against the competitive form of economic activities. This argument borrows the most from the obnoxious-market debate but fine-tunes it for questions of competition within markets. Counter-arguments refer to the beneficial effects of competition such as tyranny-control, incentivation and innovation. (3) Where the first two arguments concern the question whether competition should be allowed at all, the fair-competition argument concerns rules of proper behavior within competition: competition should be consented to, should provide good chances to win for all participants, should forbid illegitimate means, etc. While this argument stands behind many popular appeals for anti-trust legislation, legal rules do not exhaust the set of moral restrictions to competition. The paper concludes with some remarks as to whether institutional practice corresponds to moral concerns against competition or needs possible extensions.