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Re: The Free Market System


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Moderation note: this post and one reply to it was moved from the thread 22667, because it is not about welfare, but a different economic idea

 

The free market system is often run by the supply side, instead of the demand side. When Apple came out with the i-pad, it took the gamble that this new product, without previous demand, would create demand as soon as people could see it function. It didn't happen because millions of people were saying, "it would be nice if someone invented the i-pad,", and then industry hears their lament and decides to creates a supply of i-pads meet this demand. The supply side had the vision for something new, it gambles that this new product will create demand where demand never existed before. People don't say it would be nice if we had twelve brands of fast food. The supply side starts a new chain, and uses marketing to create new demand for fast food number 13. After a while, if the product and branding is done well, there is a demand created that also creates jobs.

 

The government is a little different. They also use supply side, but often provide things that are not demanded. They may decide to invent new red tape that nobody really wants. If this was free market, that business would go bankrupt. But the government has the leverage to force you to buy, through taxes. Since this is in violation of the free market, it is not the most efficient use of resources since people would prefer spend freely on perceived value.

 

With the i-pad, the demand is based on the value of a cool product. One will see it as worth the money. With the demand so high, even beyond Apples supply, other suppliers are lured into the market, to provide alternatives. This supply and demand and competition results in better and better products, cheaper, and plenty of jobs. With the red tape factory, nobody really wants this beyond those who manufacture and distribute it. There is no enthusiastic demand to drive competition, improve product and lower cost. If Apple could force you buy i-pads manufactured in an inefficient way, way over priced, why be efficient, especially if there is no competition due to extra demand.

 

If making i-pads only required half the labor force, the free market would mean lay-offs, since this is a more efficient use of resources. If there is enough demand, other new companies will try to get in on the demand, will see the lower labor requirements due to technology. If Apple does not do it, the new company will and gain an edge that could result in the entire Apple company having to shut down due to the efficiency. The new companies will take advantage of efficiency. To maintain edge and competition they use free market efficiency.

Edited by CraigD
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The free market system is often run by the supply side, instead of the demand side. When Apple came out with the i-pad, it took the gamble that this new product, without previous demand, would create demand as soon as people could see it function. It didn't happen because millions of people were saying, "it would be nice if someone invented the i-pad,", and then industry hears their lament and decides to creates a supply of i-pads meet this demand.....

 

The government is a little different. They also use supply side, but often provide things that are not demanded. They may decide to invent new red tape that nobody really wants. If this was free market, that business would go bankrupt. But the government has the leverage to force you to buy, through taxes. Since this is in violation of the free market, it is not the most efficient use of resources since people would prefer spend freely on perceived value.

 

Your overly simplistic post misses a crucial point- the government in first world countries funds the basic scientific research that leads to innovation in the private sector. The work that lead to the development of LCD displays was done in government labs in Europe and the UK before it was improved by private companies in the US. The capacitive touch screen was invented at the University of Kentucky. The photo-lithography necessary to make the processors was university developed. The phd computer scientists and industrial engineers who work at Apple were government trained. In short, no government, no ipad.

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The government is a little different. They also use supply side, but often provide things that are not demanded. They may decide to invent new red tape that nobody really wants. If this was free market, that business would go bankrupt. But the government has the leverage to force you to buy, through taxes. Since this is in violation of the free market, it is not the most efficient use of resources since people would prefer spend freely on perceived value.

I’m don’t think most people want to live in a society with only private market supplied goods and services, no government services. Rather, I think even very pro-free market people believe national government give very good value for cost at providing an environment in which markets can function, while local government provides “village commons” services such as police, emergency and trash disposal services at a lower cost than private enterprises could. In short, I don’t think many people are true anarchists, who would like to see no government – and thus, pay no taxes.

 

I’m unaware of any nations, historically or currently, that have been or are happy with effective anarchy. During the dark ages, much of medieval Europe’s was effectively privately run, but not very happily for most of their people. Present day “failed states”, such as Somalia, have no effective government, and to the best of my knowledge, no taxes, but are very unhappy places.

 

Hbond, are you suggesting that nations such as the US and EU nations would be better if all services were supplied by a free market, with no non-voluntary payments in the form of taxes? If so, how could they avoid the problems we see associated with historic and present day societies like this? Can the free market provide every service as well or better than governments do? If governments are necessary, can they exist without taxes?

 

Most objections to taxes and government I see appear to me to reactionary, fueled by an emotional sense of unfairness at their non-voluntary nature. I’d enjoy reading a well-reasoned, rational argument promoting an entirely free market-based, tax-free society.

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What "free market" are you refering to? The level playing field FDR would consider a free market economy or Bush's rape and pillage version? It seems obvious that the two had very different outcomes, though both would be considered free market.

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  • 4 months later...

Your overly simplistic post misses a crucial point- the government in first world countries funds the basic scientific research that leads to innovation in the private sector. The work that lead to the development of LCD displays was done in government labs in Europe and the UK before it was improved by private companies in the US. The capacitive touch screen was invented at the University of Kentucky. The photo-lithography necessary to make the processors was university developed. The phd computer scientists and industrial engineers who work at Apple were government trained. In short, no government, no ipad.

 

I'm unaware of the regulation surrounding these research lines by government funded groups but you can bet there was some, sorely for the reason that it comes from government. Regulation does a number of things, but first and foremost it ups costs. This is across the board, from the store clerk, to the lab, to the distributor to the seller to the buyer.

 

Secondly, regulation where government endeavors are concerned prevent competition. This prevention isn't done by normal market persuasion such as efficiency and innovation, but rather coercion. Since governments have absolute power the free market entrepreneur is often prevented, by force, from breaking into a market. This process, with thousands of examples throughout history, leaves government with a monopoly; the robust nature of which is reinforced due to unaccountable (and near unlimited) budgets.

 

But whatever, the main point that your post forgets or seems to overlook is that it assumes these technologies wouldn't have come about anyway by free market practices, that don't rely on funds extracted by force but rather rely on funding that's given in exchange for wants and needs. The free market is very simple, it's millions of people exchanging value (by way of a commodity), for things that they want. Things that they have decided benefit them. Things that they have decided enhance their lives and increase their happiness. Government projects are the complete opposite. They are funded by value extracted at the point of a gun and forced down your throat whether you want it or not. It is, in stark reality, a politician or committee deciding that they know what's best for you and forcing it upon you under the pretense that they're doing it for your benefit. And it's all backed-up and swallowed wholesale by the masses due to silly kaynesian economics. Even the politicians have swallowed the nonsense and yet countries are still run by it... I'll leave the reader to ponder why.

 

Furthermore, yes, LCD came about by government funded projects. But what didn't come about due to the money spent on these projects? That's a serious question. What was prevented from coming into being by money funded based on people's actual benefit and wants. How much further along would we be if money was exchanged for benefit only? Given freely by populations to increase their happiness and life benefits. I wonder.

 

I’d enjoy reading a well-reasoned, rational argument promoting an entirely free market-based, tax-free society.

 

Tax free is not really a viable option. Countries do need government (I would suspect). The question is how much. Governments get bigger and bigger every year (every day), despite the public faces shouting that they're give the public the opposite. Consider defense for example, countries do need walls after all, but they don't need legions to invade countries with. Government free/tax free is not the goal. Minimisation is.

 

If you want to jump right in to this subject i'd suggest human action by ludwig von mises. If you'd prefer a critique (and demolishment) of socialist doctrines you want to read socialism: an economic and sociological analysis by the same author. The classic is of course the wealth of nations by adam smith by i wouldn't suggest you start there as it's tough going.

 

If all of that is a bit much the political persuasion of most of the proponents of free markets is libertarianism. Reading this politics would certainly be easier than jumping straight into economics. I'd suggest libertarianism; a primer, by david boaz as a fitting place to start.

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