The Argument For Markets

There are only three ways to get what you want. You can exchange something for it, you can steal it, or you can beg for someone to give it to you.

Exchange is moral, stealing is immoral, and begging is dehumanizing. There is a definite pecking order of desirability among the three alternative means of getting what we want.

In the free market, goods and services are exchanged between buyer and seller at a price that is determined through direct negotiation between the two parties to the exchange. That price is necessarily fair, for unless both sides benefit, the exchange can not take place.

That is the chief argument for markets. Of the three alternative means to get what we want, it is the only one in which both parties benefit. And it is the only one that does not involve coercion.

Government doesn’t work that way. It steals from one person when it taxes, and it dispenses the loot to someone else who has successfully begged for the benefit received. The terms need not be fair, as they are dictated by only one party to the transaction - the government.

That is why markets are a better choice than government in all but a few instances. Of course, we need government to provide national defense, enforce contracts, build roads, maintain a currency - all sorts of things that benefit all citizens and could not be effectively purchased through private exchanges.

But for most things, markets are more efficient than government, and markets are more responsive to changes in wants and needs of the public. Markets are less prone to corruption, and are better able to weed out incompetence and failure.

Markets are also more democratic. Each transaction is a vote, a determination of value among those competing for your purchasing power. The fortunes of Pepsi and Coke are determined by a billion choices of a dollar each – Bill Gates gets one vote per can, and so does the day laborer in Peru. The most powerful capitalist on earth can not force his will on the market.

Pepsi and Coke must compete for your purchase of each can of soda; they also compete for your investment dollar. Millions of investors decide whether Pepsi or Coke is a better company to invest in; the CEO’s of each company are powerless over the price of their stock. You will decide what a share of Coke is worth, you and one other person who will decide to sell you their share at a price you both agree is fair.

The other key advantage of markets is that power is spread out over millions of people, instead of being concentrated in the hands of a few, as is the case in government. This is important because people make mistakes - always.

When a local bank president makes a mistake, the worst that can happen is one bank will fail – one out of thousands. When the Chairman of the Federal Reserve makes a mistake, the entire banking system fails. As if we needed another reminder.

Long before Congress got to consider a bailout for General Motors, millions of people voted on that very question. Car buyers decided to buy other products, and investors decided to buy other stocks. Millions of people decided not to exchange their labor (wages) for a GM product or a share of GM stock - they voted not to bail out GM.

So GM went to the government to get through begging for stolen dollars what it could not earn through voluntary exchange and competition. And the government obliged, dispensing billions of dollars taken from the very same citizens who had already said “NO!” to GM products and stock shares. So much for government of the people, etc. etc.

In the end, by going to the government, GM got its billions of our dollars without having to give us a car in exchange. None of us likes to haggle over a car deal, but any of us could have done better than that.