The Power Of Free Markets To Do Good

"Those of us who believe in the power of markets to do good must also believe in the power of markets to reduce harms - including the harms of pollution and climate change.  That work of market-driven harm reduction is being done right here."

David Frum

What is a free market?  A free market is one which is regulated by supply and demand.

What is supply and demand?  Supply would be how much of something (good or service) is available to the market and demand is the desire in a marketplace for that supply.

SUPPLY AND DEMAND WORK TOGETHER TO DETERMINE PRICE.

PRICE IS WHAT REGULATES, PURELY REGULATES, SCARCE RESOURCES.

DON'T MUCK WITH THE FREE INTERPLAY OF SUPPLY AND DEMAND OR YOU MUCK WITH PRICES.

ONLY THE MARKET CAN EFFICIENTLY CONTROL PRICES.  NO GUBMENT ENTITY HAS THAT ABILITY.

At least not in the long run.

Probably the best example of the power of markets to do good can be understood in the small book I Pencil.  The point of the book, which is a pamphlet really, is that nobody knows how to make a pencil.

A pencil is comprised of many things, many different materials, requiring the combination of many industries (wood, metal, rubber, graphite, paint, glue, etc.) to make it.  People in each industry have come together, each person entirely unknown to the other, to put their industrial production into the creation of such a thing as a pencil. 

The pencil says:  "There is a fact still more astounding: the absence of a master mind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found. Instead, we find the Invisible Hand at work.  The lesson I have to teach is this: Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson."

HARMONY is the root of the meaning of the word INTEGRITY.  If you want an economy to act harmoniously, to act with integrity, then allow the lesson of the pencil to work!

Organize society in harmony with the creativity of millions of people industry to industry. 

Are there things harming humankind?  Pollution you say?  The market can eradicate pollution.  Simply encourage and allow profit making in its eradication!  Let supply forces to go to work!

That sounds like supply-side economics.  Actually all economics is supply-side economics, for demand cannot be satisfied until the market is supplied with a product to satisfy it!  

Is there a demand for an unlimited, cheap source of energy - say, cold fusion?  Like the car in the movie, wouldn't it be great to give the car the ability to do it's thing by sliding a little garbage into the tank?  If you are running low on power simply throw in a banana peel, a tennis ball and an old shoe and drive (or fly) around for another month!  Wouldn't that be something?

Markets can, and will, make cold fusion possible.  Right now there is a huge demand for it but little economic activity.  Why such little activity?  Because there is no supply!  Once that demand is supplied, more and more suppliers will enter the market, create differentiation of the original product, prices will come down, and people will be able to choose between cold fusion sources.  It will be like picking out tires, or T-shirts.

And so, as David Frum suggests, there is great power in markets to do good!  They can and will make things better.  I'm not sure there is much that markets cannot cure.

Remember though, markets cannot supply the demand for a free lunch.  You will have to work for that.