In another incarnation, perhaps The Motley Monk would have been a lawyer, a financial analyst, or even an economist, although the mathematics involved in economic analysis weren't The Motley Monk's strong suit. Two semesters of calculus just about did The Motley Monk in as an undergraduate.
Yet, The Motley Monk understands and even more so appreciates the need for a free market. Unfortunately, this understanding and appreciation is something many of his undergraduate contemporaries of the early- and mid- 1970's did not possess.
So, it was refreshing for The Motley Monk to read Sandy Ikeda's recent article in The Freeman which discussed the truth concerning five timeless falsehoods about the free market that many of his contemporaries touted as truths decades ago and seem to be alive and well in the discussion about free markets today.
Falsehood #1: The free market creates scarcity and higher prices.
Truth: In any economic system, the quantity of a good will typically not be
enough to satisfy demand when the price is zero. In a free market, in which
people trade their legitimate claims to those resources, prices will tend to
rise or fall to the level where the quantity supplied equals the quantity
demanded, and in that way prices help us to cope with scarcity.
Falsehood #2: The free market means the government gives businesses
Truth: The free market is free precisely because it denies special legal
privileges to any person or group.
Falsehood #3: The free market requires that all valuable resources be
privately owned and traded on markets.
Truth: Difficult as it is for some to believe, sometimes the alternatives
to individual ownership work better. Consider how we exchange favors
with family, acquaintances, and sometimes with strangers without the
need for formal markets and market prices.
Falsehood #4: The free market is pro-war.
Truth: War and the government interventions that inevitably accompany
it restrict markets and free association, make it more costly for most people
to buy and sell, reduce the purchasing power of households and businesses,
and disrupt the peace that is necessary for a thriving free market.
Falsehood #5: The free market is always efficient.
Truth: The real world is populated by real people who don't possess
complete information, may have bad information, or who just make
mistakes. An "ideal" economic system is not one in which no one ever
makes a mistake; it is one in which the mistakes that people inevitably
make are corrected as effectively as possible.
It seems that falsehoods concerning free markets continue to abound despite the facts that have piled up during the past five-plus decades.
As the Stoic philosophers would observe: "Nihil novum sub soli" ("There's nothing new under the sun)". True, but more apropos might be P.T. Barnum's observation, "A sucker is born every minute," as President Obama's "transformation" of the American economy is built upon falsehoods that continue to be touted about the free market.
Let the discussion begin...
To read Sandy Ikeda's article in The Freeman, click on the following link:
"7 Falsehoods about the Free Market."