The Neoclassical School Of Influencing Policy Makers Essay

Competition is widely considered the backbone of innovation, and the fundamental driving force behind creative destruction leading to greater satisfaction. This is a vital element of the Neoclassical school theory which is the central school of influencing policy makers. However, a problem is that the term competition entails a broad range of variations and meanings. Thus differing schools of thought challenge this ideal, and put forward the idea that the aim of competition is usually not an absolute goal to improve oneself, but rather to be better relative to the competition (Wissenz, 2010). Criticism may be aimed at extreme forms of competition for encouraging unethical behaviour, being inefficient and providing consumers with less satisfaction than the Neoclassical School claims. Given the spectrum of strengths in which competition can be applied, it’s necessary to understand the different forms of competition, as well as the context of the markets examined. The Neoclassical perspective champions competition, in all it’s forms, as being a model that benefits both the consumers and suppliers. The benefits for consumers being an increased choice which in turn leads to better consumer satisfaction as more of these goods are modelled to specific tastes. In contrast, monopolistic markets show a decline in social welfare through limited choice, reduced consumer surplus due to the ability to charge high prices, and a potentially low need to innovate. The hypothesis that moreShow MoreRelatedThe Theory of the Contestable Market2230 Words   |  9 Pagesconcluding with an analysis of the degree to which there is synthesis. Static view of competition The static view of competition focuses on the market structure as the key determining factor in the performance and behaviour of firms. It is the neoclassical approach of competition, origination from the work of economist’s Cournot and Edgeworth. 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