The perfect competition paradigm: evolving from its ambiguities

Abstract

The Walrasian model of perfectly competitive general equilibrium (from now on, the ‘Perfect Competition Paradigm,’ PCP) has provided the benchmark for almost any research in price-production-distribution theories over a period of more than one century in the history of modern economics. It has always been clear, however, that the model does not analyse competition as such—the kind of activity usually called ‘competition’—but only the alleged final outcome brought about by competition once its work has been completed, so to speak. Consequently, the epistemological status of the PCP, as the foundation of a scientific theory of the functioning of a market-based competitive economy, has been uncertain ever since its beginnings: what kind of knowledge is it supposed to convey? Even a summary survey such as the present one is enough to make us realize that there is no universally accepted answer.