Evolutionary Understanding of Capitalist Product Markets: Adaptation-Facilitating and Diversification-Accelerating Functions

In capitalist economies, new products incessantly appear, and now, the product range traded in markets has reached more than tens of millions or even more. This chapter addresses such huge product diversity and ongoing diversification from the evolutionary perspective. An essential feature of capitalism as a resource allocation system is that the struggle for scarce resources primarily manifests as sales competition among firms and employment competition among individuals. The predominance of sales competition is accompanied by demand constraints on production and persistent excess supply (buyers’ holding of reserve resources). Sellers compete both to satisfy existing demand and to create new demand. Corresponding to this, capitalist product markets have the adaptation-facilitating function that works through the layered mechanism of quantity adjustment and price adjustment and the diversification-accelerating function that works through multifaceted sellers’ sales efforts and buyers’ product choices. In typical markets with flexible supply and differentiated products, sellers’ demand-satisfying supply behaviors and quantity adjustment as their interactions lead to quick and steady demand satisfaction. Moderate price stability and purchase certainty maintained by quantity adjustment serve as a basis on which price adjustment effectively operates in some markets without destroying order and stationarity in daily transactions. Sales efforts include advertisements, reductions in prices and costs, offering convenient locations, shortening delivery time, widening assortments, and, most crucially, demand-oriented product innovations. While serving as the criterion of product choices in the short-term, buyers’ wants change and horizontally extend through encounters with and continuous utilization of new products. Products cumulatively diversify through both the emergence of new products as well as improvements of existing products. Despite numerous difficulties sales competition brings to sellers and workers, product diversity has become an essential foundation for human liberty and empowerment.