Milton Friedman’s Free to Choose (1980), Power of the Market. Pt 1

Posted: November 17, 2010 in capitalism, free, friedman, market, milton

Finding examples in his visits to Hong Kong, the U.S. and Scotland, Dr. Friedman says that free markets are the fundamental engines of economic progress. In free markets, individuals can go into any business they want, trade with whomever they want, buy as cheap as they can, and sell at the highest price they can get. In truly free markets, governments do not interfere with any of these privileges. Individuals are free to enter the marketplace to do business, and they, and they alone, enjoy the fruits of their successes and the consequences of their failures.In free markets, producers of goods and services respond to signals they receive from buyers in the marketplace. They key production to their understanding of what people are buying and, apparently, wish to continue to buy. Using this information, they decide what to produce and in what quantity. Competitive forces in free markets promote efficiency. Because there is free entry of new producers into the market, individual producers must keep costs down in order to price their products at competitive levels. This means the resources they consume tend to be used efficiently. If they are not, costs of production rise, selling prices go up, and the producer may not be able to sell his product because it is not priced competitively.Free markets promote voluntary cooperation among a great diversity of people. As Milton Friedman points out, even making something as simple as a pencil requires the cooperation of thousands of people largely unknown to one another. Because the pencil manufacturer needs paint, graphite, wood, glue, and other components, widely separated groups of individuals have an incentive to produce these items and ship them to the pencil plant. This cooperation is not accomplished by any government. Individual freedom and economic freedom are tightly linked. It is difficult to conceive of personal freedom existing in isolation from economic freedom. Thus, the free market system not only promotes economic progress, but also buttresses our cherished individual freedoms.

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