Free Markets: how can both sides win in a trade?

The “free market” proponents always say that free markets lead to all parties involved in trade to greater wealth than they had before the trade. How can this be? Why to “progressives” refuse to believe that? Today, let us look into these questions.

First of all, what is the “free market”?

The free market is a general term that is shorthand for all the billions of voluntary exchanges that happen each day in a given society. Each individual exchange is undertaken voluntarily between two individuals (or groups represented by individual agents) where these two sides exchange economic goods. These “economic goods” can be tangible commodities or intangible commodities. I gave the grocery store about $3 yesterday for some tomatoes. They think they are better off with the 3 bucks and I know I was better off with the tomatoes. (food of the gods by the way) Now a third party might look at the trade and wonder why the both sides both feel like the trade enriched them and the answer is valuation is a subjective thing. They store wants money more than tomatoes and I can’t eat money but can eat my favorite fruit. In like manner, I work for an employer and I exchange my labor services, in a mutually agreed way, for a monetary salary while my employer gets my services for that money. So far both sides of the deal are happy with the arrangement.

In any voluntary exchange, both sides of the trade undertake the exchange because each expects to gain from it. If both sides are happy with the trade they may well elect to trade again next time. If the trade does not yield the results that one side or the other expected (we do make mistakes after all) then there may be no trade next time.

The main idea so far presented is that both sides of a trade do so because they expect to be better off after the trade in some way — some way that is informed by their subjective value system. Please note that there are no totally free markets on planet Earth. We have a sliding scale of freedom from something like the communist North Korea to the free New Zealand and so we often say “The Market” rather than “The Free Market”.

The above reasoning refutes the arguments against free trade made by the neo-mercantilist elites of the USA and the millions of dupes who believe them when they claim that in any trade only one party can benefit only at the expense of the other. In international relations this leads to the belief that the stronger nation should use force or intimidation to set the terms of all trade. At home and abroad the “progressives”, “neo-cons”, and most others believe that in every transaction there is a winner and a loser: an “exploiter” and an “exploited.” The fallacy of this dominate viewpoint is can be seen by the eagerness of parties to engage in trade in the first place. Never the less, the vast majority still believe that one must use force and intimidation to have fair trade. Utterly amazing.

How can both parties benefit from an exchange? For the simple reason that each one values the two goods or services differently! If they did not have different value systems then there would be far less reason to do any trading. It is these value judgment differences that set the stage for an exchange.

Why do “progressives” believe that only government force can bring fairness? Because they are socialists and do not understand economics or human nature. Their world-view is that the big evil corporations are subjugating the poor little folks and only government can make the field level. When you ask them how this is working out for everyone they simply retreat into saying “it is bad now, but would be worse if there was no controlling government”. Deluded. Deranged. Duped.


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