Week of the Doc

Doc Searls was here most of the week, hanging out at the 43rd Street Headquarters for Contrary Thinking. The weather was gnarly, so it’s a good thing he got some great photos when he was here two weeks earlier.

Free Entry

We had a great dinner Sunday night, as described by Doc and Adam Fields. Both point to my mention of a bedrock economic principle that has fallen on such hard times that they both were struck by the concept when I mentioned it. From Wikipedia:

Free entry is a term used by economists to describe a condition in which firms can freely enter the market for an economic good by establishing production and beginning to sell the product.

Free entry is implied by the perfect competition condition that there is an unlimited number of buyers and sellers in a market. In comparison to perfect competition, however, free entry is a condition often more applicable to real world conditions. To see this, suppose there is a good which not many people want, which is produced by only one firm. In this situation, there is not perfect competition. However, if there is free entry, the market is likely to be more efficient than if there is not. If the monopoly firm raises its prices too high, another firm could enter the market and take its customers. According to this reasoning, where there is free entry the economic damage caused by monopoly behavior may be mitigated.

These are smart, knowledgeable guys, so the fact that it is not their common knowledge is a Bad Thing. That’s because free entry into the market place is the First Amendment of Economics: a precondition for any legitimate economy. The absence of free entry ensures economic tyranny.

And that’s what we’ve got, folks.

11:36:11 PM    

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