Talk:Dynamic efficiency
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Old stuff (header added 5/16/2015)[edit]
There is some debate regarding whether dynamic efficiency is best pursued through increasing market competitiveness. Theoretically speaking, perfectly competitive firms earn normal profit and do not have the resources to dedicate to R&D. On the other hand, monopolies and oligopolies, though uncompetitive, tend to earn super-normal profit by providing lesser quantity at higher prices (MC=MR point on the elastic part of the AD curve) and have greater incentive to invest in R&D (Adding barriers to entry through patents and copyrights, discouraging future rival firms that will be attracted by the super-normal profits, differentiating their products in oligopolies, etc). Uncompetitive markets will have a greater incentive to safeguard their abnormal profits.
Becoming the devil's advocate, possible drawbacks might be long term harm to the environment (think supermarkets vs small shops), discouragement to new businesses, and unfair power concentration in the market. However, the gains in terms of decreased LRAC for natural monopolies might actually preserve resources over the long term.
Sorry for the boring paragraphs. If you know some economics, please go through them. If not, I'd just like to inform you that the view that dynamic efficiency can be improved by promoting competitiveness is a value judgement, not necessarily true and cannot be presented as fact.
Previous lede[edit]
The previous lede was a copyvio straight from Stiglitz and Walsh glossary. Quoting it here:
"Dynamic efficiency is a term in economics, which refers to an economy that appropriately balances short run concerns (static efficiency) with concerns in the long run (focusing on encouraging research and development)."
In addition to the problem of copyright violations this is actually NOT the usual definition of dynamic efficiency. It is definitely NOT the concept of dynamic efficiency/inefficiency as it appears in the Solow and Overlapping Generations models. I'm guessing Stiglitz is using a definition related to monopoly rights over patents and copyrights but that's a completely different thing.Volunteer Marek (talk) 00:56, 17 May 2015 (UTC)