How the Free Market Works

Posted by: on Aug 7, 2013 | One Comment

Free markets have been the idea that various doctors and thinkers of philosophy have espoused as being the sole approach to a truly democratic and equal society and economy. It is the free market and the free price system that makes goods from all over the globe, available to consumers. Unlike the lethargic and uninspired system of socialism, where governments have the final authority, free trade brings in incentive and suitable reward to the one who strives to reach a cut above.


Austrian economics has revolutionized the way terms and dealings are seen and understood. This model prioritizes that in order to have production, present consumption must immediately be foregone to avail future consumption. It should be understood that a laborer is not one who labors his life out, but who provides labor in exchange for wages, and a landlord, one who allows the use of his land in exchange for rent. Similarly, capitalism is the deal whereby the owner of capital rents it out. The moneylender deals in the initial, most essential act of saving, which makes production possible. He is required to be patient early on, and let his money be used. The entrepreneur is one who assumes the risk in case of a failure. To allegations that entrepreneurs make jaw-dropping riches, the same analogy can be responded with. An entrepreneur within the working of a free market economy is one who acquires whatever is left after the laborer, capitalist, and landlord are paid off. So, the odds of incurring colossal gains are the same as of incurring huge losses. Stocks in a free market determine the rates at which the dealing parties decide to buy or sell their commodities or services. A shortage in goods will provide buyers with an incentive to bid higher to own their desired goods before stocks finish. Likewise, a surplus credits the seller with an incentive to bid lower to sell out stocks.

Opposition of the Free Market

The free market model of economy has run into a lot of social censure of late. The modern society is aggressively speaking up for socialist economic systems and, in such circumstances, it becomes necessary to reiterate that free trade might not be all that cruel. Probably the biggest argument against free market economy is with ideals and ethics. It is often said that a free market is a zone of coercion and exploitation, where the ‘weakest’ are thoroughly exploited, forced into buying or selling involuntarily. Another charge levied against this model is that there is no coming out of the rut for the penniless, and that the desperate and the poor keep getting enmeshed in a vicious circle. However, it is about honoring the original collaboration of forces which rented out their services and goods to usher forth a desired result.

Economy should not be only about sharing an outcome, but sharing the effort and the heart that went into the making of a fortune. The same goes for the charge that free trade encourages accumulation of wealth at the expense of the helpless – saving in order to rent out one’s capital should not be confused with merciless amassing of wealth.

The Epitome of Liberty and Parity

The free market, without a doubt, is the most natural mechanism when it comes to economy running. This is because it is founded on the primitive principle of supply and demand. Whenever requirement arises, supply becomes imperative, and in turn, an exchange of goods or services, ensues. Contrary to allegations of a forced dealing, within a free market system, the exchangers of goods, in fact, have a choice. Both the buyer and the seller can fix values to their money and goods!

In my next blog, I will be writing about the flourishing free trade economies and liberal trade policies. Read my blog on Free Markets and Liberty.

1 Comment

  1. Free Markets and Liberty | Rakesh Wadhhwa
    August 7, 2013

    […] If you are wondering about the functioning of free markets, you can read my blog on How the Free Market Works. […]


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