My View of the Free Market System

Victoria Rock

Unit 1 DB

The free market system was set up to encourage competitions and level the playing field for both new and existing commodities, allowing the consumer the freedom to buy any product they want, in the amount they wish to. The basis of the competition is the freedom of choice that exists in pursuit of monetary returns. Producers watch the market system closely and make decisions based on the supply and demand at which point a unique price is determined. For example, if the price of a commodity is high, then market forces interact to ensure equilibrium. Based on this, there is competition between buyers and sellers in the sense that as buyers but more items, producers react by producing more of the demand item.

It is fare to argue that although the free market system is not perfect, sellers and buyers defuse economic power within the business and households that make up the economy. Proponents feel that the system brings about optimal distribution of the country’s resources. With the vast amount of buyers and sellers that act independently, no single one can dictate the price of the product but can determine the price by hiding the cost of production very carefully. In a free market system, the distributions of the country’s resources are also based on distorted market systems like monopolistic completion, and oligopoly which leads to suboptimal distribution of a country’s resources. Also because of competition there is the freedom of entry and exit which enables the economy to adjust to consumer preferences, technological change, and resource availability. Companies that drastically increase the price of goods would lose sales to competitors. The market system is a profit-and loses system due to decisions that individuals make which determines the success of a company as a whole.

As I have learned this past year in school, no system is perfect. One could argue that the free market system is not a perfect system. How could it be when in fact it consist of players that make decisions based on personal or company interests without giving any regard to the general economy. Those who increase the inequalities of income and wealth further leads to the exploitation of the weak and underprivileged. The opponents of free market claim that openness leads to defenselessness while foreign competitors and political adversaries can exploit the situation. In my opinion the free market system is filled with greedy individuals with only one goal in mind, to make as much profit as possible. The US and World economy nearly collapsed in 2008 because companies made decisions they felt would enhance their profits when in fact all they did was put peoples economic status in jeopardy. The opponents of free market is correct when they claim it leads to greater inequalities, however with regards to

people making wrong choices that could harm, that is not acceptable. It is a democratic value that the freedom of choice be granted and we have to respect that choice.

Reference

(2009). Chapter 3; Supply and Demand. In W. Krugman, Economics 2nd edition (pp. 61-92). New York: Worth.

PIPA. (n.d.). 20-Nation Poll Finds Strong Global Consensus:Support for Free Market System But Also More Regulation of Large Companies. Retrieved November 10, 2011, from Globe Scan: http://www.globescan.com/news_archives/pipa_market.html

Reich, R. (2010, Feburary 11). One Free Market System for Wall Street, Another Free Market System for Main Street. Retrieved November 10, 2011, from Huff Post; Business: http://www.huffingtonpost.com/robert-reich/one-free-market-system-fo_b_459023.html?

Rothbard, M. N. (n.d.). Free Market. Retrieved November 11, 2011, from The Concise Encyclopedia of Economics: http://www.econlib.org/library/Enc/FreeMarket.html