I've heard this criticism of a free market touted very often. It's often used after I claim that a price system allocates goods to where they're most valued. It goes something like this:
"The free market can only work if all individuals have a similar purchasing power, if they do not, production will always be geared towards those with the highest ability to pay, not to where they're most valued."
It's a tricky one for me...thoughts?
Irish Liberty Forum
It's simplistic garbage. Wherever there is purchasing power, i.e. effective demand, there is a profit to be made and a market to serve. The wealthiest firms are those which serve the common man, i.e. those whose purchasing power is mediocre. So all I can say about this statement is that it is horrendously ignorant. The market caters to all, rich, poor and in-between alike, so unless more is said in the way of how this is supposed to hinder the operation of a market, dismiss it as blather.
Freedom of markets is positively correlated with the degree of evolution in any society...
Just tell him about this little-know company called Wal-Mart that became one of the most profitible companies in the world by producing for lower-income consumers
MatthewWilliam:"The free market can only work if all individuals have a similar purchasing power, if they do not, production will always be geared towards those with the highest ability to pay, not to where they're most valued."
This is the problem with "socialists", their brains do not work very well.
Is not those that have the highest ability to pay those that are most valued? Generally, those that are wealthier in a free society are those that are the most productive.
At most, I think only 5% of the adult population would need to stop cooperating to have real change.
"The free market can only work if all individuals create their own purchasing power, if they do not, production will always be geared towards those with the least incentive to work, not to those who value work the most."
What they are saying is basically that free markets can only work if they do not exist.
Here is Mises on this matter from "Planned Chaos" (http://mises.org/web/2714#Ch.3)
"The market is a democracy in which every penny gives a right to vote. It is true that the various individuals have not the same power to vote. The richer man casts more ballots than the poorer fellow. But to be rich and to earn a higher income is, in the market economy, already the outcome of a previous election. The only means to acquire wealth and to preserve it, in a market economy not adulterated by government-made privileges and restrictions, is to serve the consumers in the best and cheapest way. Capitalists and landowners who fail in this regard suffer losses. If they do not change their procedure, they lose their wealth and become poor. It is consumers who make poor people rich and rich people poor. It is the consumers who fix the wages of a movie star and an opera singer at a higher level than those of a welder or an accountant."
--Mises
In essence the free market recognizes all purchasers power to purchase, that is the free market looks at the medium of exchange equally, the misconception that the socialist has is that the market will shun the people with less medium of exchange.
This is a logical paradox, the customers with the most medium of exchange are always in the minority, it is illogical that the market would shun the majority because individually each member has less meduim of exchange than an individual in the minority, this is because the majority in total has more medium of exchange than the minority does in most cases.
This also does not take into account that those that produce more are abused when they are granted the same amount of medium of exchange as those who produce less or none at all...
It sounds like the ocean, smells like fresh mountain air, and tastes like the union of peanut butter and chocolate. ~Liberty Student
DD5: "The market is a democracy in which every penny gives a right to vote. It is true that the various individuals have not the same power to vote. The richer man casts more ballots than the poorer fellow. But to be rich and to earn a higher income is, in the market economy, already the outcome of a previous election. The only means to acquire wealth and to preserve it, in a market economy not adulterated by government-made privileges and restrictions, is to serve the consumers in the best and cheapest way. Capitalists and landowners who fail in this regard suffer losses. If they do not change their procedure, they lose their wealth and become poor. It is consumers who make poor people rich and rich people poor. It is the consumers who fix the wages of a movie star and an opera singer at a higher level than those of a welder or an accountant." --Mises
Excellent quote
DD5: What they are saying is basically that free markets can only work if they do not exist. Here is Mises on this matter from "Planned Chaos" (http://mises.org/web/2714#Ch.3)
I wanted to write something about this for a few weeks now. You gave me the inspiration to upgrade Wordpress and do it today. Thanks.
Here is my blog post.
Markets are not democratic
I don't care if folks comment on it there or here. If you have a site of your own, you are welcome to comment there and leave your backlink. Otherwise, by all means keep it in this forum discussion.
liberty student: Here is my blog post. Markets are not democratic I don't care if folks comment on it there or here. If you have a site of your own, you are welcome to comment there and leave your backlink. Otherwise, by all means keep it in this forum discussion.
I agree, with your blog, specifically that the market is not a democracy, but there is much contention with Panarchy as it is used for global governance, or should I say misused, you might want to explain that better...
I linked it to Rozeff's article which I think does an excellent job of laying it out.
My audience are mostly liberty nerds, I don't write for laymen.
liberty student: I linked it to Rozeff's article which I think does an excellent job of laying it out. My audience are mostly liberty nerds, I don't write for laymen.
I looked at it, how do you think I knew you were nto talking about the UN?
I may be a back seat economist, but I try to keep up
Harry Felker:I may be a back seat economist, but I try to keep up
You're doing great Harry. I told you we were gunna mess you all up. Of course, I wasn't counting on you giving back so good.
liberty student:Of course, I wasn't counting on you giving back so good.
I had training with others much more belligerent than I have seen here...
You quote should begin:
"The free marke is the ONLY system that can work if individuals have different purchasing power...."
The reason is simple, the free market is the only system where suppliers have incentive to service people with less purchasing power. Yes there will be some supplier who focus on rich buyers but there will also be suppliers that focus on the poorer folks.
The best example and the only one necessary to debug the myth is the existence of Walmart. The other is the existence of Hundai and KIa in the US market who have focused on poor folks first and have focused on progressively wealthy folks later.