Meeting Your Basic Needs and the Free Market System
Abraham Maslow’s theory on man’s hierarchy of needs makes the case that man must fulfill his basic needs, such as food and shelter, before he can focus on higher needs. Every country is faced with the dilemma of how to ensure its citizenry’s basic needs are met. Failing to do so on a large scale will ultimately lead to chaos and lawlessness.
The solutions are as numerous as the countries in the world. Many nations attempt to fulfill these needs at the expense of their population’s freedom. Others adopt a market based economy giving their citizens more freedom.
In America, we find liberals seeking more government intervention, while conservatives seek less. Which option is best? If we look at how the pure market system works, we can clearly see that no other system can match it when it comes to ensuring basic needs are met, leveraging the expertise of the people, and being responsive to change and innovation.
A market based system primarily relies on individual citizens producing goods and services. People attempt to create a good or service that others want, hoping they will be able to trade it for something of equal value such as money, or another good or service.
The value of the product has a direct correlation with the demand for the product. For example, if one orange is available and two people want it, the orange’s price will rise until there is only one person willing to buy it. This system applies beyond purchasing material goods.
As workers, we sell our labor to employers. The pay received is commensurate with the demand for the job, and the availability of qualified workers to perform the job. At any time, if one thinks they are being underpaid for the job they are doing, they can ask for a raise or quit and find someone else to hire them. In this system, education is valued, and skilled laborers tend to earn more money because they are typically in shorter supply.
Conversely, unskilled laborers are often paid less — they are in greater supply. This can change when one factors in job risk. When few people want to do a job that is inherently dangerous, regardless of the skills needed to perform the job, they may make a higher wage as there is a shortage of willing applicants.
There are several benefits to using the market system. For one, it leverages the ingenuity and resourcefulness of the country’s vast populous as opposed to using the few in government as centralized planners. This was clearly evident in the technological race between the US and the USSR during the Cold War. The USSR was constantly telling its people to sacrifice a little longer as they were just about to match the US in their technological capabilities. The problem was, when they got there, the US had already advanced to a higher level. Central planners were not intuitive or flexible enough to keep up with that of the US populace.
Liberals often decry the evil nature of capitalism, and make the false case that companies seek to cheat one another. However, competitive market systems actually contribute to the general good order of the nation. A famous experiment called “the prisoner’s dilemma” highlights this. In this test, people were teamed up to compete with other teams. Cheating was allowed, and was advantageous in most situations. However, it was found that cheating was only effective for a couple of rounds of play. When play was extended, teams would remember the slight, and refuse to work with the cheaters. The results of the prisoner’s dilemma exercise clearly explain why the vast majority of businesses win in the long run playing by the rules.
It is amazing to think about how many trillions of peaceful business transactions happen every year with limited government involvement. The laws of supply and demand work to effectively find a fair price for goods and services. Employers and employees form a symbiotic relationship where the employer pays the worker commensurately with their skill level, while the worker focuses their efforts to ensure the continuation of the business.
Clearly, the market based economic system initially adopted by the US is one of the most agile and efficient systems available. Its ability to innovate and meet the needs of society is directly linked to government’s purposeful decentralization of the economy. So when we look at Obamacare, Cap n’ Trade, Card Check, Dodd/Frank, and other legislation, see this for what it really is — stifling innovation, reducing supply, increasing costs, and ultimately reducing our ability to meet our needs.