Free market is a Hard Sell

Free market often seems a hard sell. The resistance and opposition to its seemingly straightforward case emerges and persists, over and over again. It is all very strange, since, after all, how many people do not want the personal liberty to make their own choices about what to buy, where to live, and the amount they are willing to pay for something?This is the crucial task as hand: Restoring a sense of right and wrong in terms of what are people’s individual rights in making their own choices and in their freedom of associations and agreements with others.
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The same applies to their decisions on the supply side of the market. Which one of us does not want to decide what type of job and employment we’d like to pursue, the wage we are willing to accept for a job offered to us, and the ways we might apply our talents and abilities?

The alternative is for someone else to make all such decisions for us. When the fairy-tale rhetoric and utopian dreams about socialism are put aside, and people are told that a real socialist system involves the government telling you where you will live, the kind of job to which you will be assigned, and the wages and amenities of lifet to which you will be allowed, along with the personal freedoms that will be restricted or done away with, many of them soon become disillusioned, and even, sometimes, strongly opposed.

There is also the important moral element to the free-market society, that being that all human relationships should be based on mutual agreement and voluntary consent. Most people do not want to be coerced into associations and relationships to which they do not consent.

Stated in such general terms, certainly a majority of people in the United States would, no doubt, say they believe that these are essential and desirable elements to a free and good society. If the interested person were willing to sit through a more detailed explanation and understanding of the economics of the free society, they would most likely also agree with the logic of division of labor and comparative advantage.

Division of labor and gains from trade

When individuals specialize in their labors and develop their particular skills and abilities, all are made better off in a social setting in which we each offer in trade that which we decide to specialize in and obtain in exchange from others the goods and services we could not produce on our own, or at least not as effectively in terms of qualities or costs as some trading partners. Even if we are more productive and cost-efficient in many or most things compared to potential trading partners, by buying some things from these less efficient producers, it frees up our time to specialize in those areas where our productivity and income-earning possibilities are greatest.

A standard example of the latter is the highly valued lawyer who could do his own gardening around his home in, say, four hours, while a professional gardener might take five hours to do the same job. But if the lawyer’s opportunity cost is such that if those four hours are freed up to represent clients in court for $100 an hour, then even if the less efficient gardener were to charge him $50 an hour, for a total cost of $250, the lawyer would still be ahead to the tune of an additional $150 by entering into an exchange with a less efficient trading partner. If the lawyer values more highly what the extra $150 of income would enable him to buy than doing his own gardening, then both, clearly, gain from the market transaction. The more productive and the less productive all can find a place at the common table of free-market collaborative association.

So why, then, are people so often resistant to allowing the free-market to go about its work? To say there is “one” answer to this question would, of course, be completely misplaced. But a central one, in my view, is an aspect that has its origin in the very system of the division of labor that improves the overall economic wellbeing of all those participating in the social network of specialization.

Consumer interests and trade restrictions

Each of us in our respective producer roles in the division of labor offers for sale the particular good or service that we have chosen to specialize in. Only to the extent to which we are successful in producing, marketing, and selling that good or service to others in society can we earn the financial means that enables us to return to the marketplace in our role of consumer. In that role, we demand all the other diverse goods and services others in society are, in turn, specializing in the production and sale of so they, too, can earn the financial means to be consumers in the arena of competitive exchange.

Another way of expressing this is that while we are consumers of many goods, we are normally the producer of one or more goods or services. None of us can be a consumer unless we have first succeeded as a producer. As a consequence, we pragmatically place far greater importance on our producer role than on our consumer role in society.

Suppose you produce and sell a product that earns you $5,000 per month, or $60,000 a year. And further suppose that during the year, you spend that $60,000 on 20 different types of goods (e.g., food, housing, clothing, entertainment, transportation, etc.), or, on average, $3,000 per year on each of these categories, or $250 per month (just for the sake of the example).

Imagine that some of the domestic producers of clothing were to lobby their representatives in Washington, D. C., and successfully have an import tax imposed on their foreign competitors’ clothing apparel entering the United States, a result of which is the price of clothing in America increases by, say, 10 percent. This means that the clothing you had been purchasing for $3,000 over the year, or $250 per month, would now cost you $3,300 per year, or $275 per month.

As a consequence, you would find that your income now did not go as far as it had before in the purchase of clothing. You would have to reduce your apparel purchases accordingly, or marginally reduce your buying of other things, so to maintain the real amount of clothing purchased even in the face of the 10 percent rise in its price.

You might mumble and grumble, and if you were aware that this had been caused by the lobbying activities of American clothing manufacturers, you might curse it as another instance of “crony capitalism.” But out of $60,000 of expenditures during the year on all the various types of goods and services you buy, are you really going to become a radical anti-tariff activist over the loss of $25 a month in your standard of living due to this instance of trade protectionism? In many instances, it’s not even equal to the cost of one evening’s nice meal at a pleasant restaurant. And that $300 is barely 0.005 percent of your total $60,000 of spending on all goods and services over the year.

Consumer interests and trade restrictions

Each of us in our respective producer roles in the division of labor offers for sale the particular good or service that we have chosen to specialize in. Only to the extent to which we are successful in producing, marketing, and selling that good or service to others in society can we earn the financial means that enables us to return to the marketplace in our role of consumer. In that role, we demand all the other diverse goods and services others in society are, in turn, specializing in the production and sale of so they, too, can earn the financial means to be consumers in the arena of competitive exchange.

Another way of expressing this is that while we are consumers of many goods, we are normally the producer of one or more goods or services. None of us can be a consumer unless we have first succeeded as a producer. As a consequence, we pragmatically place far greater importance on our producer role than on our consumer role in society.

Suppose you produce and sell a product that earns you $5,000 per month, or $60,000 a year. And further suppose that during the year, you spend that $60,000 on 20 different types of goods (e.g., food, housing, clothing, entertainment, transportation, etc.), or, on average, $3,000 per year on each of these categories, or $250 per month (just for the sake of the example).

Imagine that some of the domestic producers of clothing were to lobby their representatives in Washington, D. C., and successfully have an import tax imposed on their foreign competitors’ clothing apparel entering the United States, a result of which is the price of clothing in America increases by, say, 10 percent. This means that the clothing you had been purchasing for $3,000 over the year, or $250 per month, would now cost you $3,300 per year, or $275 per month.

As a consequence, you would find that your income now did not go as far as it had before in the purchase of clothing. You would have to reduce your apparel purchases accordingly, or marginally reduce your buying of other things, so to maintain the real amount of clothing purchased even in the face of the 10 percent rise in its price.

You might mumble and grumble, and if you were aware that this had been caused by the lobbying activities of American clothing manufacturers, you might curse it as another instance of “crony capitalism.” But out of $60,000 of expenditures during the year on all the various types of goods and services you buy, are you really going to become a radical anti-tariff activist over the loss of $25 a month in your standard of living due to this instance of trade protectionism? In many instances, it’s not even equal to the cost of one evening’s nice meal at a pleasant restaurant. And that $300 is barely 0.005 percent of your total $60,000 of spending on all goods and services over the year.

Consumer interests and trade restrictions

Each of us in our respective producer roles in the division of labor offers for sale the particular good or service that we have chosen to specialize in. Only to the extent to which we are successful in producing, marketing, and selling that good or service to others in society can we earn the financial means that enables us to return to the marketplace in our role of consumer. In that role, we demand all the other diverse goods and services others in society are, in turn, specializing in the production and sale of so they, too, can earn the financial means to be consumers in the arena of competitive exchange.

Another way of expressing this is that while we are consumers of many goods, we are normally the producer of one or more goods or services. None of us can be a consumer unless we have first succeeded as a producer. As a consequence, we pragmatically place far greater importance on our producer role than on our consumer role in society.

Suppose you produce and sell a product that earns you $5,000 per month, or $60,000 a year. And further suppose that during the year, you spend that $60,000 on 20 different types of goods (e.g., food, housing, clothing, entertainment, transportation, etc.), or, on average, $3,000 per year on each of these categories, or $250 per month (just for the sake of the example).

Imagine that some of the domestic producers of clothing were to lobby their representatives in Washington, D. C., and successfully have an import tax imposed on their foreign competitors’ clothing apparel entering the United States, a result of which is the price of clothing in America increases by, say, 10 percent. This means that the clothing you had been purchasing for $3,000 over the year, or $250 per month, would now cost you $3,300 per year, or $275 per month.

As a consequence, you would find that your income now did not go as far as it had before in the purchase of clothing. You would have to reduce your apparel purchases accordingly, or marginally reduce your buying of other things, so to maintain the real amount of clothing purchased even in the face of the 10 percent rise in its price.

You might mumble and grumble, and if you were aware that this had been caused by the lobbying activities of American clothing manufacturers, you might curse it as another instance of “crony capitalism.” But out of $60,000 of expenditures during the year on all the various types of goods and services you buy, are you really going to become a radical anti-tariff activist over the loss of $25 a month in your standard of living due to this instance of trade protectionism? In many instances, it’s not even equal to the cost of one evening’s nice meal at a pleasant restaurant. And that $300 is barely 0.005 percent of your total $60,000 of spending on all goods and services over the year.

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