Perfect Competition-Based Allocation May Lead to Inefficient Resource Allocation That May Magnify Into Severe Economic Disequilibrium at the National Level

Perfect competition is one method for allocating resources in an economy. It is widely thought to be better and more efficient than other approaches for allocating scarce resources. However, actual practice and practical experience with perfect competition-based approaches in observational economics suggest that the method can lead to inefficient resource allocation that, in some cases, magnify into severe economic disequilibrium at the national level. This abstract preprint uses two examples to illustrate how perfect competition model can lead to inefficient resource allocation, sometimes at the national level. Firstly, United States created 364 SARS-CoV-2 diagnostic kits in the recent COVID-19 pandemic. This is much higher than the 42 tests created by second-placed China. Tremendous amount of time and money was expended in creating these 364 test kits, and is a result of the perfect competition mechanism espouses by the U.S. economy where different stakeholders attempt to produce a more accurate and easy to use test kit to seize a large fraction of the U.S. diagnostic market. But, is this necessary? Could we use some of the research manpower to create diagnostic kits for other pathogens? Secondly, in the textbook publishing business, there are often multiple similar textbooks for the same or related titles in the marketplace, all competing for readers and their purchase. Naturally, perfect competition and the desire to beat other textbook authors generate the economic phenomenon of multiple similar textbooks of similar content for the same topic. Such a situation meant that resources (author time, expertise, and printing capacity) were misaligned with the under-appreciated real need of informing readers of more topics from different angles and perspectives. Overall, the rush to market and hot topic and trendy topic phenomenon created by the perfect competition model leads to inefficient allocation of resources at the national level, where the extra resources (time and capital) should be put to use in other areas of similar need