A Free Market Economy
Today we’ll have a history lesson. Based on the title above some of the sharper among you may think this is going to be an economics lesson, but based on the current situation this concept may start to be a thing of the past, therefore this becomes a history lesson. I looked up this concept in Wikipedia:
“In social philosophy, a free market economy is a system for allocating goods within a society: purchasing power mediated by supply and demand within the market determines who gets what and what is produced, rather than the state.”
When we can get government to stay out of the mix the free market seems to work. I want a loaf of bread so I go to the baker and buy a loaf of bread for the price the baker sets. I get a nice loaf of bread; he sells a loaf and makes a profit on that loaf. As long as I’m happy with my loaf of bread it’s none of my business how big a profit the baker earned for the loaf. Now if I have a choice of bakers and a choice of loaves of bread I have to make a decision. Baker A, Baker B, and Baker C all sell their loaves for fifty cents a loaf (notice the price; I wanted this to be a real historical document). Baker D is real proud of his loaves he tries to sell them for a dollar a loaf.
Bakers A, B and C all sell about the same number of loaves. The public chooses based on their personal preferences for the individual baker’s style. Baker D rarely sells any bread; his price is out of line with the free market. Only the desperate and the stupid buy bread from this gamoke.
See how nice the free market works. If Baker D learns to control his costs, and become competitive he too will sell a fair share of the loaves, but when his price gets out of line, he’s baking bread for no apparent reason.
Now if we were to create a perversion to the free market by creating bread insurance, the customers could pay a fee or premium to an insurance company to help them pay for their bread. This would pervert the price the bakers receive for their effort; it would alter the price that the consumer pays for their loaves.
If I’m paying money, directly out of my paycheck so I lose sight of how much I’m paying for the insurance not to mention how much the bread costs. Bread becomes a freebie, its not like I’m really paying for it any more. Somebody else is.
The baker has his business perverted as well, now he gets paid based on the agreements with the insurance companies. Some insurance companies will pay him a price less than the customer used to pay but enough to cover his costs and provide a small profit. This works for a time, but costs rise and customer base grows and shrinks and nothing stays the same.
At some point it’s possible that the price of bread that costs forty cents to bake and used to sell at fifty cents, now costs 50 cents to bake but is selling for more than a dollar a loaf, because the insurance company has to cover its administrative costs and the baker has to hire a few people to process the claims to get paid and the consumer is paying more than fifty cents per loaf in insurance premiums.
There is no more competition when you don’t care how much you pay for a loaf of bread because you aren’t paying for it anymore. You buy it from Baker B because they’re affiliated with your bread insurance provider. You used to prefer Baker A because his bread was better, but you’re content to go to Baker B because it’s covered and your insurance pays for it.
A baker is entitled to make a much money baking and selling bread as he can. Personally I hope he becomes a millionaire selling bread, because if he can than anyone can, that’s part of what makes this country great. But for any baker or any person to be successful the free market economy is the engine to that success.
The free market sets fair prices and establishes reasonable costs without the layers of administration and rules and restrictions. The free market lets supply and demand establish the limits to production and consumption.
If you make a good loaf of bread, I’ll buy that loaf and pay your price; if you don’t make a good product for a good price then you won’t thrive and will not stay in business. Your products and your prices will determine that, not some agency or administrative process. Government needs to learn how to lower our taxes and spend less of our money and keep out of our economy as much as possible.
The sort of people who run for office are only good at fixing elections, they aren’t good at running a business. Once we finally get them out of office they’ll learn that as well. The sooner they’re unemployed the sooner our free market economy can get back to normal.