The Benefits of the Free Market

markets

Free markets are somewhat of an enigma to some people and are even looked at by others as a threat to our current society. Some people have the idea that free markets are markets where companies can go un-checked and are free to take advantage of consumers for their own benefit. This view is one that assumes that companies are the ones “holding all the cards” in these markets. However, that is not the case at all. In fact, it is just the opposite. Additionally and contrary to the idea that free markets are a threat, they are what affords our society the high standard of living that we currently enjoy. It is also free markets that are responsible for the innovation that we continually see and for all of the advancements in technology, medicine, and every other industry that we could think of. Let’s look at a few of the benefits of the free market.

Demand Drives Supply
In a free market scenario, supply and demand forces dictate economic results. More specifically, it is demand (the consumers) that really dictates economic results, because demand is what drives supply. And manufacturers (supply) will “react to the market” in the form of responding to demand and manufacture the demanded products. Companies will only manufacture goods that consumers want and are able to buy, as long as it is economically viable (meaning, they can make a profit that will allow them to continue manufacturing the wanted good). They will not manufacture a good that customers do not want and are unwilling to buy.

Innovation
In a free market, competition exists (naturally) also as a way to benefit the consumer in terms of quality of goods. Because consumers (demand) are the driving force in the free market, and manufacturers are competing with others for the same consumers, manufacturers have an incentive to use technology in a way that continually enhances existing products. They are always in the business of making their product more attractive to the consumer to purchase. We see that in





Better products
The competition that is naturally generated in the free market between manufacturers in the same industry also leads to better products for the consumer. The same reason that manufacturers have an incentive to work efficiently and prices their products at competitive prices is the same reason why they have the incentive to innovate their products, or create other products that are better.

Rations Prevented
In a market that is not purely free, there is always the danger of product shortages or even the need for rationing, especially in regard to essential products. For example, in times of fuel shortages, you will inevitably see consumers “stocking up” on gasoline, topping off their tanks in order to prevent the situation where the next time they need gas, they will be unable to find any (because everyone else it topping off and stocking up). Many states have laws which prevent businesses to increase their prices at a level politicians feel would be “unfairly” charge consumers in an emergency situation (price gouging). The fact of the matter is that if the free market were to be allowed to dictate the price, the law of supply and demand would take over and would allow for a more tapered shortage, and more availability to more consumers.

I will discuss more benefits of the free markets in future articles.

Please comment and discuss.