Adam Smith in his book “Studies on the Nature and Causes of the Wealth of Nations” (1776), in contrast to the mercantilists, advocated freedom of competition within the country and in the world market, sharing the principle of “laisser-faire” put forward by the French economic school of physiocrats – non-interference of the state in the economy [12 p.39]. He also showed that under certain social conditions, private (individual, egoistic) interests serve the interests of society. He summarized the key role of competition for the functioning of a market economy in his famous principle of the “invisible hand”, according to which competition is the most important mechanism for ensuring the efficiency, proportionality and dynamism of a market economy.
Features of competition in the theory of A. Smith:
A. Smith considered decentralized or free competition, not regulated by the state; A. Smith considered competition in the conditions of the atomistic structure of the market (competition with many small market participants, each of which cannot influence market parameters); competition in Smith’s theory was considered as a dynamic process that ensures economic and social progress.
So, we can come to the conclusion that according to A. Smith, competition performs the following functions:
decentralized atomistic competition ensures the satisfaction of the needs of society, encouraging producers to produce goods that enjoy social utility; free competition stimulates the reduction of production costs; market competition optimizes the distribution of resources within industries; market competition optimizes the distribution of resources between industries. [2 pp.31-33.].