The Miracle and Morality of the Market
Richard M. Ebeling
In this short article we learn the simple mechanism that makes our economy work so well. Interfering with that mechanism is not only harmful, it is immoral.
Prices convey the information that we need to make our economy work. Here is why:
How are the activities of an increasingly larger group of individuals successfully coordinated, so that all the multitudes of demands and supplies are brought into balance and harmony? The Austrian economist and Nobel Laureate Friedrich Hayek showed how all of the knowledge and information in society can be encapsulated in the price system of the free-market economy. In our roles as both consumers and producers we communicate to one another what we think goods, resources, capital, and labor services are worth to us in their various and competing uses through the prices we are willing to pay for them. These “price signals” serve as the means for all of us to decide and coordinate what we want and are willing to do together with other members of society.
Because of the information conveyed by prices, is not necessary for a government to rule over the economy to cause it to function properly. In fact, government intervention in the economy is harmful, because the market is so complex that it is impossible to guide effectively. Central planning of economic activity will make people poorer, not wealthier. As Thomas Sowell relates: “The last premiere of the Soviet Union, Mikhail Gorbachev, is said to have asked British Prime Minister Margaret Thatcher: How do you see to it that people get food? The answer was that she didn’t. Prices did that. And the British people were better fed than those in the Soviet Union, even though the British have never grown enough food to feed themselves in more than a century. Prices bring them food from other countries.”
The moral dimension of the market refers to how in a free society, people enter into transactions freely, choosing those that they believe will benefit them:
There are none who are only masters and others who are simply servants. In the market society we are all both servants and masters, but without either force or its threat. In our roles as producers — be it as men who hire out our labor for wages, resource owners who rent out or sell our property for a price, or entrepreneurs who direct production for anticipated profits — we serve our fellow men in attempting to make the products and provide the services we think they may be willing and interested in buying from us.
Yet we know there are those who wish to interfere with the working of a free market through various means. All attempts to do this reduce the amount of liberty we are able to experience.
Too many want to dictate how others may make a living, or at what price and under what terms they may peacefully and voluntarily interact with their fellow human beings for purposes of mutual material, cultural, and spiritual betterment.
Often the concept of free markets is viewed as contrary to a moral society. Those who advocate government programs to make us better off are portrayed as noble, virtuous, and smarter than the rest of us. This article shows us that they are not that at all — they are immoral. Why? Almost all these programs forcibly take money from one person and give it to another to whom it does not belong. There is no moral right for anyone or any government to do that, no matter how noble the cause appears.