Does the Comparative Advantage Theory of Competition Really Replace the Neoclassical Theory of Perfect Competition?

Abstract

The Comparative Advantage Theory of Competition (CATC) is proposed by Hunt and Morgan (1995) to replace the Neoclassical Theory of Perfect Competition (NTPC). The new theory claims to offer a better explanation for key macro and micro phenomena. The authors’ purpose in this article is to evaluate the CATC's potential as a replacement for the neoclassical theory. They argue that (1) both the NTPC and CATC are offshoots of the exchange paradigm; furthermore, (2) the efficient theories in the exchange paradigm family cannot claim superiority over one another since a supracriterion for their contest is lacking; and (3) the CATC—even when considered efficient—cannot challenge the NTPC, let alone replace it. In addition to meeting a host of conditions, a successful contender must come from a new paradigm, which the CATC does not. Therefore, the replacement assertion remains unjustified.