Tuesday, May 11, 2010

Why we need more free markets, and less government

From Practical Economics

The central tenant of capitalism is promoting freedom of economic choice for individuals
and the society as a whole. When millions of people are making decisions on a daily basis without
coercion, it can be said that a free market is operating. Liberty exercised by all in the free market is
what counteracts and holds in check the effects of inefficient decisions made by individuals or
small groups. In the free market the group protects against the individual. As a benefit, the well
being of the society is protected by the market because efficiencies are promoted and thus the
standard of living is enhanced.

In Capitalism and Freedom, Milton Friedman outlined the essence of economic freedom
and the effect it has on serving everyone to positive ends.
So long as effective freedom of exchange is maintained, the central feature of the
market organization of economic activity is that it prevents one person from
interfering with another in respect of most of his activities. The consumer is
protected from coercion by the seller because of the presence of other sellers with
whom he can deal. The seller is protected from coercion by the consumer because
of other consumers to whom he can sell. The employee is protected from coercion
by the employer because other employers for whom he can work, and so on. And
the market does this impersonally and without centralized authority.
The impersonal nature of the free market creates a situation where all people are treated
equally and with the same level of dignity. As is the case many times when looking to understand
capitalism, the impersonal nature of the free market looks to be a negative strike against capitalism.
As it turns out, the free market is one if capitalism’s most shining features because it forms the
foundation that allows for the civility of humanity.

In exercising freedom of choice, individuals are sometimes faced with a consequence that
makes the market at times seem like a failure. However, evaluating the power of freedom within
such short-term and narrow applications does not shed light on capitalism’s long-term success in
providing for everyone. Friedman summed the importance of freedom in any rational analysis of
“Underlying most arguments against the free market is a lack of belief in freedom
itself. . . The society that puts equality before freedom will end up with neither. The society that
puts freedom before equality will end up with a great measure of both. . . The only way that has
ever been discovered to have a lot of people cooperate together voluntarily is through the free
market. And that’s why it’s so successful to preserving individual liberty.”

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