Even those with a modest grasp of basic economics will know that capitalism can only work when price competition is allowed to thrive within a free-market economy. Businesses compete with each other on the basis of price and quality, with the result that inefficient firms disappear, prices remain affordable and consumers’ needs and desires continue to met. That’s the theory, and logical and widely accepted it is too. But it is not one to which respected economist William J Baumol chooses to subscribe. For Baumol believes that the driving force behind competition, and therefore capitalism itself, is not price but innovation. And after reading his 2002 publication The Free-Market Innovation Machine: analysing the growth miracle of capitalism, few of us are likely to disagree.[1]
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