Will people police themselves or should government be involved?
When you think about the term free market, the feeling you get is of something good that would benefit both sides, but does it really? Thomas Jefferson once said, "A wise and frugal Government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities." However with that being said, can people really police themselves without government intervention?
First of all, what is a free market economy? A free market is a competitive system where supply and demand regulate the prices. It is found in countries where the limit on economic intervention is on private property and tax collection. Forces of supply and demand of a commodity set prices which in turn establishes the allotment and division of goods and services. In a free-market economy, competition, supply, and demand are what mainly influence decisions in contradiction to a planned economy. All economies on the planet rely on four major resources for growth, that is: land, labor, capital, and entrepreneurs.
Other Types of Economic Systems
1. Command or Planned economy:
In this type of system, the government controls all areas of the economy regulating everything from labor done, natural resources, and capital, with the government having the last word on how to use and distribute these resources. You find in such a system, entrepreneurs rarely profit from their successes since revenue flows back to the government, cutting off incentive, competition, and property rights. Communism and socialism both fall under planned economies and are both based on the ideology that goods and services produced in an economy need public ownership and control by a centralized organization. Communism asserts that distribution among the population be according to a person’s needs while socialism states distribution be according to the amount of a person’s production efforts.
2. Mixed economy:
This system has characteristics of both free market and planned economies where some industries are privately owned and others publicly owned. The system itself is usually seen as a blend of socialism and laissez-faire capitalism where the government enforces taxes, fees, and regulations to manipulate the economy while attempting to support the autonomy of private ownership. There are hard choices while balancing the country's security and an individual's liberties in a mixed economy however that’s a challenge not easily avoided and dealt with constantly.
Pros and Cons of a Free Market Economy
Adam Smith; cited as the originator of modern economics and capitalism, stated in “The Wealth of Nations,” when supply outpaces demand, companies compete to offer the lowest price to consumers, who benefit from the competition. Smith believed free competition needed to exist within a society to promote economic development. This in turn would protect consumers and laborers from exploitation.
Ideally a free market economy in its purest form would promote competition, innovation, wealth creation through enterprise, property rights, and a strong consumer society. The right to inequality in work ethic would drive everyone to compete and succeed where in a planned economy, equal distribution of wealth would lower competition and promote government dependence. Consumers and businesses need each other to form a relationship that determines the cost of a good or service and the health of the market. If a recession (economic decline) hits, the market would correct itself by shedding poorly performing businesses taxing to the capitalistic system leaving only strong businesses to rebuild the market.
However companies in free markets tend to seek monopolies, where the company sets the prices instead of market demands. These types of companies prize more the profits they can make from the consumer than the contribution they give, doing everything in their power; moral or immoral, to maximize their profit margins. A sub par education system too may leave consumers without skills necessary to compete in the market place. John F Kennedy the 35th President of the United States once said, “Our progress as a nation is no swifter than our progress in education. The human mind is our fundamental resource.” Education is what boosts an economy and allows entrepreneurs to succeed in developing new ideas, services and products that help the market. Without a proper education system, the people in a society find themselves begging for crumbs from the government or as laborers for hire, cogs in the big corporate wheel, getting by on how much it takes a corporation to replace them than what they’re worth.
Is a free-market economy considered immoral? It’s neither moral nor immoral though the system is accountable to the actions of people in a society. If greed for profits rules a people in society to the point they disregard the welfare of the population, then immorality takes hold and spreads like a cancer within that society. However the opposite is true when people seek to add value through their contribution and not solely to gain a profit. For the economy of a government to flourish, all interactions between businesses and consumers in a free-market should promote a win-win situation for both parties. A free-market economy then is only as good as the character of its citizens. Unfortunately in the imperfect world we live in, should we still trust people to police themselves or are governments right in enacting forced checks and balances in the form of regulations to prevent abuse? The latter seems to work at the moment but at what price. The key is a balance that protects individual freedoms, promotes private business while keeping government regulations to a minimum. As Thomas Jefferson stated, “We hold these truths sacred and undeniable, all men are equally and independently created, that from that equal creation they derive rights inherent and inalienable, among which are preservation of life, liberty, and the pursuit of happiness.”