Almost no product markets are competitive auction markets ... on the one hand, most competitive markets monopolistically competitive fixprice markets, not standardized product competitive flexprice markets ... and on the other hand, the largest value added in the economy is sold into oligopolistic markets.
So if the default was "normal", it would be an oligopolistic fixprice market, and to treat a market as a competitive auction market, you would have to justify that it does, in fact, differ from the norm in those specific ways.
OTOH, with a competitive auction market, Marginal Costs add up to a Supply Curve that is, by virtue of the infinite elasticity of firm demand, independent of market demand ... so you can talk about demand shifts and supply shifts and pretend that they can be independent things, where in 95%+ of all markets in the world, any change in demand elasticity a shift in the traditional Marshallian supply schedule, and a supply shift to a different part of the demand schedule with a different elasticity implies a further shift in supply.
So the default case is what's easiest to talk about with the traditional toolkit, not what's normal. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
the default case is what's easiest to talk about with the traditional toolkit, not what's normal.
the default market in the marginalist economics tradition is the competitive auction market, so a competitive auction market can be assumed by default in a discussion without requiring a defense, but any other market requires defense.
However, this explains why economists attempt to convince politicians to turn everything into competitive auction markets. Energy liberalisation, emissions trading, anyone? When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
