Economic Problems with Free Market Economies Essay
Economic Problems with Free Market Economies
Everyone always seems to be searching for happiness, and a free market seems to be something that could bring happiness to a community. “Economics starts with one very important assumption: Individuals act to make themselves as well off as possible. To use the jargon of the profession, individuals seek to maximize their own utility, which is a similar concept to happiness, only broader (Wheelan 6). In a free market “people don’t buy things that are worth less to them than the asking price. And people don’t sell things that are worth more to them than the asking price (or if they do, its never for long…” (Harford 63). If you are paying for what a product is worth then you are happy, and in a free market you are paying for the cost, and not for the cost plus un necessary extras. People are happy when they only spend what they need to spend on a product that they need in their life. All throughout the world there are issues of lying and misleading people.
Hartford discusses that “a world of truth leads to a perfectly efficient economy, one in which it is impossible to make someone better off without making someone else worse off.” (Harford 61). With a little truth being told between people there will be a more efficient economy. So what happens when there’s more than one business added into the mix? There becomes competition. People tend to gravitate toward the cheapest, but best quality of product. “In the competitive market, price equals cost; there is no incentive for anyone to produce less or to produce more. The competitive rule-price equals cost equals value to the consumer-keeps things efficient” (Harford 68). Every business is trying to stay in business and therefore in a free competitive market the other businesses are keeping each other in business by keeping the customer happy.
Wheelan talks about how attracted people are to something when the price falls. This seems to hold true in personal experiences throughout my life. When I go to one store to buy laundry detergent and it has a certain cost I am pleased with the cost, but if I go to a competing store to buy the same detergent and find it costs less I immediately become joyful. Free competitive markets seem to make consumers happy. If consumers are happy they will continue to consume. Once consumers become unhappy they will stop purchasing and find a different way of finding the product desired. If the people are happy, they will consume, which will make the businesses happy.