I remember reading somewhere that perfect competition under a free market was not really stable nor desirable.

This is because it causes profit margins to tend to 0 which has 2 negative effects:

* makes companies more fragile to externalities

* does not allow companies to accumulate treasuries that enable them to do research, innovate, take risks, etc

The end result is a stale stagnated balkanized economy. The corollary is that some market imbalances and assymetries are healthy.

Anyone knows where this reasoning comes from? Did I dream it up?