Free Markets – Making Virtues Out of Necessities

Posted by: on Apr 22, 2013 | No Comments

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” – Adam Smith

Unabashed self interest may not be the ideal position to take in terms of moral thought, but it is the single most effective catalyst for economics that is as progressive and robust as it is fair. Why do people do the things they do? Why do they get up in the morning, and go about their business as a routine? In almost all cases, they are either trying to earn a living, or preparing themselves to be able to do so in the future. Who are they doing this for if not for themselves, and perhaps, their near and dear ones? The fact is, any economic activity that people engage in, is meant largely to serve their own personal interest.

Is Self Interest a Bad Thing?

Self interest is intrinsic to the survival for all things living. And human beings are no different. However, humans are not merely interested in survival. There are things they aspire for. It helps them achieve a better quality of life for themselves. So, they find things to cultivate, create, or serve, which they can exchange for other things they need – or at least perceive they need for themselves.

The novelty of this lies in the fact that, while every productive action of an individual is geared towards serving his/her own good, in doing so, he/she also ends up creating something that another individual might need or aspire for. So, while the butcher is serving his own self interest when he cuts up the meat, he has produced an item that is very valuable for the nourishment of others in his community. The magic of free markets is that self interest induces behavior that benefits not just the self, but others as well.

While the idea of self interest may be morally contentious, even repulsive to some, it does not necessarily entail greed. In fact, long term self interest might actually lead people into doing some truly altruistic things, like volunteer for the physically challenged, or take care of the old and needy.

Self Interest Helps Shape Truly Free Markets

When no one stands in their way, people tend to naturally create fair and equitable free markets. We have to understand that human beings are motivated by a great variety of material and emotional desires. When coupled with the ingenuity that makes us the most evolved living organism on the planet, this translates into an innate ability to evaluate and choose an economic activity from the available ones, which will enable to us to fulfill as many of the desires as possible. And this can happen only when no one stands in the way of this choice.

In terms of our modern economic systems, where money has replaced the barter system, what we must remember is that producers of goods and services are as human as the consumers. Both would like to satisfy their material needs and desires. So, neither will let the other get away with an unfair deal for very long. Producers will keep trying to maximize profits, and consumers will keep looking for products and services that get them the best value for their money.

The success of free markets is directly linked to the degree of open competition allowed and encouraged in them. But those who seek to get what they desire with less effort might attempt to introduce interventions, or devise ways to limit the natural competitive balance that pervades an economic system based on self interest. Guarding against these forces must be a priority for every self-interested, free-willed human being.

Leave a Reply