What is meant by 'competitive'?
It is nothing about ability or attitude. In economic theories, it is rather stated as the opposite to monopoly, and it is actually an 'inability' to affect something unilaterally.
In a sense, it is a decision concept, where there is an equilibrium of the decisions of various agents rather than an individual decision. A 'competitive equilibrium' is first and foremost an equilibrium, and the term 'competitive' can be actually eliminated since when talking about an equilibrium, the competitiveness or involvement of interacting agents is already inferred.
While Nash equilibrium is a kind of equilibrium, which is actually also 'Pareto Optimum' equilibrium as they both measure individual welfare states, there can also be definitions of equilibrium where aspects other than welfare is emphasized, for example goods, the equilibrium of goods, or equilibrium of demand and supply of goods, which in case can be measured cardinally and equilibrium can be equivalently translated as equality, so 'competitive equilibrium' actually refers to equality of demand and supply.
In Nash and Pareto definitions, welfare can only be measured ordinally, unlike goods, and equilibrium refers to an ordinal or relative 'equality' of welfare for all agents. Thus to ask what is the relationship between 'competitive equilibrium' and 'Pareto optimum' is actually to ask whether the cardinal goods equilibrium and ordinal welfare equilibrium can be consistent, i.e. achieved simultaneously / interchangeably.
As another way to put this, competitive equilibrium is the equality of demand and supply, a positive matter, and Pareto optimum is the 'equality' of welfare, a normative matter. And the question is whether the same mechanism that drives an equilibrium allocation of goods is automatically conforming to our ethical standard of equal welfare. The equilibrium of goods allocation is something naturally occurring in nature. What economists found is the mechanism behind, which is selfishness (individual optimization), meaning that nature achieves equilibrium with our being selfish, and it is our being selfish that helped nature allocate its resource. And the economists did something even further than reconciling selfishness with nature. They reconciled with themselves, and proved that being selfish is being ethical, and to be ethical you have to be selfish.
It is nothing about ability or attitude. In economic theories, it is rather stated as the opposite to monopoly, and it is actually an 'inability' to affect something unilaterally.
In a sense, it is a decision concept, where there is an equilibrium of the decisions of various agents rather than an individual decision. A 'competitive equilibrium' is first and foremost an equilibrium, and the term 'competitive' can be actually eliminated since when talking about an equilibrium, the competitiveness or involvement of interacting agents is already inferred.
While Nash equilibrium is a kind of equilibrium, which is actually also 'Pareto Optimum' equilibrium as they both measure individual welfare states, there can also be definitions of equilibrium where aspects other than welfare is emphasized, for example goods, the equilibrium of goods, or equilibrium of demand and supply of goods, which in case can be measured cardinally and equilibrium can be equivalently translated as equality, so 'competitive equilibrium' actually refers to equality of demand and supply.
In Nash and Pareto definitions, welfare can only be measured ordinally, unlike goods, and equilibrium refers to an ordinal or relative 'equality' of welfare for all agents. Thus to ask what is the relationship between 'competitive equilibrium' and 'Pareto optimum' is actually to ask whether the cardinal goods equilibrium and ordinal welfare equilibrium can be consistent, i.e. achieved simultaneously / interchangeably.
As another way to put this, competitive equilibrium is the equality of demand and supply, a positive matter, and Pareto optimum is the 'equality' of welfare, a normative matter. And the question is whether the same mechanism that drives an equilibrium allocation of goods is automatically conforming to our ethical standard of equal welfare. The equilibrium of goods allocation is something naturally occurring in nature. What economists found is the mechanism behind, which is selfishness (individual optimization), meaning that nature achieves equilibrium with our being selfish, and it is our being selfish that helped nature allocate its resource. And the economists did something even further than reconciling selfishness with nature. They reconciled with themselves, and proved that being selfish is being ethical, and to be ethical you have to be selfish.
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