Free Markets

Who Best Sets Prices?

Maybe I have been somewhat remiss in this series by not speaking enough about why the Free Market System tends to be so successful. Of course, it is based upon free choice, private property rights and incentives. But probably the most important aspect of this successful system is that it sets prices at a rate that both the buyers and sellers agree upon. If not, the products and services won’t sell, so adjustments will be made.  In a socialistic system, the prices are set by central planners, who have little incentive to learn about, much less respond to, the needs and demands of the consumers. So who is in a better position to decide how many red cars or electric cars or flat screen televisions to manufacture and at what price, a seller whose business relies upon successful sales, or a bureaucrat?  Everyone will – or at least should – agree that the manufacturer is better placed and motivated.
China still has government control over many manufacturing businesses, but has been increasingly successful since the death of Mao Zedong in allowing individuals within the companies to make those business decisions. Otherwise, virtually every other place that has ever tried to have manufacturing and pricing decisions made by central planners has ended up in misery, if not starvation.  So why do we not celebrate the Free Market System more fully and broadly? Because people like us tend to be quiet when other people who get carried away by emotion sing the praises of socialism. Literally, they don’t know what they are talking about.

Comments are closed.