The Privatization of Roads and Highways - Ludwig von Mises Institute

Road Privatization: Rejoinder to Mohring 369
good on all sides, no transactions costs, zero profits, equilibrium,
etc. To say that no real world industry can meet these stringent
conditions is a vast understatement. But that is just the point. If
Mohring were to implement his requirement, there would be,
there could be, no private industries at all. Every last economic
activity known to man would either be owned and run by the
government (e.g., the Soviet system) or “owned” privately29 but
managed or controlled by it (e.g., the fascist system).
The point is, “perfect competition” is a totally made up scenario,
having nothing whatsoever to do with the real world; it is
used by mainstream economists such as Mohring as a stick with
which to beat up on real life business firms. Perfect competition
functions in economics as would the ravings of a madman in
criminology who insisted he would kill (or at least consider illegitimate)
all people who were not eight feet tall and did not
weigh less than one hundred pounds.
In contrast to this ersatz concept is the Austrian concept of
real competition, rivalrous competition. Here, it is not necessary
that everyone be all-knowing, nor that all products be homogeneous,
30 that there be an indefinitely large numbers of buyers
and sellers such that none of them can have any effect on price, 31
etc. All that is required is that there be no laws criminalizing
entry into an industry. Then, there can be rivalrous competition.
The Austrian is no “nose counter.” Mere large numbers, or their
absence, neither ensure nor preclude competition in this sense.
29I.e., in name only.
30Actually, this amounts to a demand that there be only one product. If
there are more than this amount, then, necessarily, they cannot all be homogeneous.
But if so, then perfect competition is, to that extent, vitiated, since
there must of necessity be a dilution in the number of buyers and sellers of it.
31This requirement too, is illogical in that it violates the rules of mathematics.
It is impossible that no one buyer or seller has exactly zero effect on
price, and yet all of them, together, do. A million times zero is still zero,
despite the best efforts of mainstream economists to defend the opposite
conclusion.