---
entity_slug: bank_competition_effects
evaluator: null
evaluated_at: '2026-02-23T00:37:33.842274'
overall_score: 4.6
scores:
- name: definition_precision
  value: 4.0
  max_value: 5.0
  rationale: The definition clearly identifies a distinct economic mechanism - how
    competition among banks creates specific behavioral incentives and outcomes. It
    avoids circularity and specifies concrete effects (prudence, efficiency, service
    quality, risk diversification).
- name: source_grounding
  value: 5.0
  max_value: 5.0
  rationale: This concept is directly grounded in Smith's explicit arguments in Book
    II, Chapter 2, where he discusses how banking competition naturally regulates
    the industry and promotes stability. The entity accurately reflects Smith's actual
    reasoning about competitive dynamics in banking.
- name: domain_placement
  value: 5.0
  max_value: 5.0
  rationale: '"Regulation" is the correct domain assignment since Smith presents competition
    as a form of natural market regulation that governs banking behavior. This fits
    perfectly within his broader framework of how market mechanisms can substitute
    for or complement formal oversight.'
- name: vsm_relevance
  value: 4.0
  max_value: 5.0
  rationale: This entity maps well to S2 (coordination/anti-oscillation) as competition
    serves as a coordinating mechanism that prevents excessive risk-taking and market
    instability. It also has elements of S3 (internal regulation) as competitive pressure
    creates self-regulating behavior within the banking system.
- name: explanatory_value
  value: 5.0
  max_value: 5.0
  rationale: This entity illuminates a crucial structural mechanism in Smith's economic
    theory - how competitive forces create endogenous regulatory effects without external
    intervention. It explains the causal relationship between market structure and
    institutional behavior, providing genuine insight into economic dynamics.
---

# Evaluation: Bank Competition Effects

## definition_precision — 4.0 / 5.0

The definition clearly identifies a distinct economic mechanism - how competition among banks creates specific behavioral incentives and outcomes. It avoids circularity and specifies concrete effects (prudence, efficiency, service quality, risk diversification).

## source_grounding — 5.0 / 5.0

This concept is directly grounded in Smith's explicit arguments in Book II, Chapter 2, where he discusses how banking competition naturally regulates the industry and promotes stability. The entity accurately reflects Smith's actual reasoning about competitive dynamics in banking.

## domain_placement — 5.0 / 5.0

"Regulation" is the correct domain assignment since Smith presents competition as a form of natural market regulation that governs banking behavior. This fits perfectly within his broader framework of how market mechanisms can substitute for or complement formal oversight.

## vsm_relevance — 4.0 / 5.0

This entity maps well to S2 (coordination/anti-oscillation) as competition serves as a coordinating mechanism that prevents excessive risk-taking and market instability. It also has elements of S3 (internal regulation) as competitive pressure creates self-regulating behavior within the banking system.

## explanatory_value — 5.0 / 5.0

This entity illuminates a crucial structural mechanism in Smith's economic theory - how competitive forces create endogenous regulatory effects without external intervention. It explains the causal relationship between market structure and institutional behavior, providing genuine insight into economic dynamics.
