Why do people love competition so much in the field and in the pool, but fear and hate it in the business world? The analogies between Olympic fare and life in a free market are very close, closer than people realize. Yet we celebrate competition in one sector and try to ban the other.

Consider that millions of people have been glued to their TVs, computers and assorted devices following the exploits of the world's athletes in the Olympic Games in London.

We pound the stuffing out of the sofa cushions rooting Michael Phelps on to yet another record-breaking gold medal. We nervously watch while Gabby Douglas negotiates that treacherous four inches of pine - the balance beam.

Yet while they cheer the dominance of Phelps in the pool, they recoil at Wal-Mart's dominance in the marketplace. The competition in the pool gets tougher and tougher. Phelps wins only because he gets fast and faster.

The same goes for the marketplace. Wal-Mart wins because it keeps lowering the prices that you and I pay. The constant threat that Wal-Mart will force local stores out of business and then jack up prices and push consumers into poverty hasn't happened. It won't happen unless government gets in the way, and that's because success itself breeds more competition.

Just as Phelps inspired younger swimmers that are now his competition, Wal-Mart inspired Amazon or Target or Dollar Store or the next big box or boutique that we haven't heard of yet.

In Liberalism, last week's Laissez Faire Club selection that came to all members, Ludwig von Mises explains what would happen if competition disappeared. "There would be no further progress in production." There would be no more improvement. Yes, this would save everyone effort, but to what end? Mises says that output would fall because there would be "no relationship" between effort and reward.

Who doubts this is true in sports? It's the same in economics, exactly as Mises explains.

The beauty of market-based competition is that the real winners are customers. We all receive the benefit of a business's ability to provide goods cheaper and more efficiently. In the same way, fans of the USA benefit by ever better performance from their athletes. From sports, we gain psychological benefit; from market competition, we gain ever better stuff at ever lower prices.

Conversely, the biggest scandal of this Olympics is the disqualification of South Korean, Chinese and Indonesian badminton teams for NOT competing. Fans and badminton officials were outraged when these teams threw matches in an attempt to secure easier opponents in the round-robin format. Not competing is not an option.

In sports, as in business, peace is preferred to war. A sense of fair play abounds. The fiercest rivals embrace after competition, the winner and loser congratulating each other on a good game.

The surest way to win in sports and business is through training and discipline. No real competitor wants to harm his or her opponent; he or she wants to come out on top "fair and square." Government, on the other hand, is constantly breaking the rules and engaging in violence.

Competition can come from anywhere in a capitalist society. No one cares about the poverty an entrepreneur grew up in, what school was attended or whether he or she attended school at all.

It is the performance in the marketplace that counts. There is no caste system in laissez-faire capitalism. It is a true meritocracy. Nobody buys a product because of the seller's pedigree.

Oprah Winfrey is the daughter of an unwed mother and grew up poor. But the media mogul conquered poverty, sexual abuse and her own teenage pregnancy and is now worth billions.

Casino titan Sheldon Adelson grew up in the poor Dorchester neighborhood in Boston, the son of a cabdriver. Now he is one of the richest men in the world.

The marketplace, not government edict, decided Adelson and Winfrey would be wealthy. How and where they grew up doesn't matter.

Likewise, gymnastics judges gave no heed to Gabby Douglas' background growing up poor, that her parents are separated, that her mother just filed for bankruptcy. In sports competition, only her power, poise and performance counted.

This is exactly the opposite of the way government regulates and controls. Getting things done in government is all about who you know and where you went to school. Family connections mean everything and provide barriers to entry for newcomers, who are excluded because there is no market system to determine who is most productive and who excels.

In the Games, the stopwatch and the tape measure determine success or failure. For instance, despite being the ripe old age of 39, Bulgaria's Jordan Jovtchev continues to compete at a high level against men half his age. He even qualified for the final in still rings.

So it is in the marketplace. Old firms are constantly being challenged by new upstart competitors. There are no seniority rules in the marketplace. Old competitors pit their experience and guile against youth's new ideas and exuberance.

In sports, we understand that great competitors watch and learn from others. They emulate what succeeds and avoid what fails. This is all to the good. Everyone benefits because it makes everyone and everything more excellent. But in commerce, we have laws that forbid people from learning and emulating others' behaviors.

When Android learns from iPhone, government says it is stealing ideas. Stephan Kinsella soundly refutes the idea in Against Intellectual Property (another club selection).

While this marketplace combat makes consumers richer, anti-capitalist commentators and politicians refer to the competition in derogatory terms. Henry Hazlitt, in his Economics in One Lesson, lists the familiar terms: "dog-eat-dog," "cutthroat," "law of the jungle" and "survival of the fittest."

But Hazlitt asks: Why should it be treated as uncivilized or violent or to compete for customer business? These barriers are erected in the name of consumer protection, but they always turn out to be the work of business firms working with government to exclude competition. Competition cuts into profit margins. Resting on your laurels is not an option when you have to compete.

Likewise, athletes that were last year's world champions can't mail in last year's time or performance. They must do it all over again, and likely they'll have to be even better to win. Business works the same. Last year's technology can't compete. People may pine for the good old days, but they want their products and services up to the minute.

This is how society progresses. Instead of government throwing up hurdles to competition with wage and price controls, tariffs and the like, we should encourage and even cheer for friendly competition in the marketplace.

Every competitor at the Olympics is better for having trained and sacrificed to do their best. And when businesses are forced to compete, they will also seek to improve their product and service each and every day to win customers. It is competition that makes consumers the ultimate champions.

We are left with the question: Why do people love competition in sports, but fear it in the world of commerce? The answer is that problem that has been with us always: economic ignorance. To solve that problem is why Henry Hazlitt wrote his Economics in One Lesson and why we also made this book a gift to all people who join the club

There is no "law of the jungle" at the Olympics - or in a truly free society, either.

Regards,

Douglas E. French
for The Daily Reckoning Australia