A super-ordinate framework of collusion

The trouble with markets is not what happens when they equilibrate but what happens when they dis-equilibrate. When they remain in dis-equilibrium, the markets deliver lots of unearned wealth. 

The question is how does a society and an economy become accustomed to a system that generates lots of unearned wealth? Supposing a population has a high preference for unearned wealth. Would that result in lots of unearned wealth being earned in the economy? That would be an interesting result but it is not necessarily the case. 

The reason the pure market model seems to work is because the neo-classical economists claim a steady state where the marginal benefit finds an equality with the marginal cost and rarely rises above it. The real question in market economics however is how well does the mechanism of competition really work. It is all well and good to postulate a smooth working, competitive environment but what happens if the acquisition of super-profits enables the players to erect or defend entry barriers that guarantee the persistence of super-profits? What happens if the incumbents then use those super-profits to alter the ideological structure of the society? What happens if the super-profits then enable the incumbents in one industry to favor incumbency in other industries and even in other sectors? 

It is not realistic to rely on an automatic mechanism that does not explicitly defend the levelness of the playing field to maintain that playing field as level. Once the players discover how to tilt the playing field in their favor it will just be a matter of time before they gain control of the market mechanisms to shift the rules of engagement in their favor. In other words, in a world where extreme myopia leads to normal profits and slightly less myopia leads to super-profits (albeit, for other reasons, unsustainable in the long run) it is naïve to believe the system will remain extremely myopic and not move to the state of slightly lesser myopia especially where the loss of that myopia results in extremely high rewards to the private accounts of society’s most influential people. 

The resource curse or the abundance curse takes effect when the conditions of abundance overwhelm the conditions of scarcity, and when the impulse to competitiveness, which is itself a creature of scarcity, becomes weaker on account of the achievement of sufficient abundance in the sector for all the players to decide no longer to compete with each other but to collude with each other instead. Once that collusion takes hold, the society needs to impose a super-ordinate framework of collusion so that all collusion favors the general welfare rather than the welfare of the factions.