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The power of the free market

By LillyAnne Beatty
web posted October 5, 2020

What happens when a government is limited to its proper function and people are free to pursue their own objectives? What is economic freedom, and how does it assist in preserving our personal freedoms? In the first of his 1980 lecture series, Free to Choose, The Power of the Market,’ Milton Friedman presents a convincing case for the free market, examining practical examples of free-market principles in the early United States and Hong Kong, and discussing the fundamental ideas that allow every market to operate.

We begin our journey in Hong Kong, a place that isn’t exactly a hub of natural resources, yet remains one of the most “thriving and successful places” in all of Asia. While there are hardly any natural resources, Hong Kong is home to a bustling harbor, rapid economic development, and a rather significant lack of duties and tariffs on imports and exports. Wages have consistently risen, and the nation has one of the highest standards of living in all of Asia. How? Friedman explains that Hong Kong is an excellent example of the free market at work. In fact, Hong Kong has, what Friedman refers to as, “the freest market in the world.”

Throughout the entirety of his lecture, Milton Friedman makes his position on the market very clear, stating “I believe we need a government, but we need a government that sets a framework, and rules within which individuals, pursuing their own interests, can work together and cooperate.” He emphasizes a need for freedom to promote individual incentives, an idea repeatedly discussed throughout the episode. This idea of ‘invisible incentive’ driving the market was interesting to me, and his illustrations reminded me of a short essay I had read a few years ago when preparing to debate “Free vs Fair Trade.”

The essay, I, Pencil by Leonard E. Read, follows the ‘genealogy’ of a lead pencil. We find ourselves in Northern California and Oregon, examining the “saws and trucks and rope and countless other gear used in harvesting and carting [the] cedar logs to the railroad siding.” Later we are brought through the mining of ore to make steel to make axes, the beans ground to coffee for the workers to drink, the railroad engines that carted the cedar logs to the mill, and so forth. The little graphite pencil Read and Friedman bring to life was created not by one factory worker putting together lead and wood and paint, rather by “millions of human beings [who had] a hand in [its] creation.” Both Read and Friedman encourage the idea of an unrestricted market, one in which “society's legal apparatus remove[s] all obstacles the best it can.” and that we should have faith that free men and women will respond to the Invisible Hand (Economist Adam Smith’s famous free-market incentive theory).

Friedman’s ideas echo similar sentiments presented by the Timothy Taylor videos I've watched -- that the market need not be restricted, and that people (when acting in self-interest) will benefit others (albeit inadvertent) by simply participating in free-market exchanges. The merchant wants to produce the best goods- better than all of his or her competitors- thus providing the consumer with high-quality products. The consumer wants the best quality product, thus providing an incentive for the market to produce a certain good. Overall, Friedman presents a convincing case for the free market, and why the market is a much more subtle and powerful mechanism than most people believe. In Friedman’s own words, “I don’t want to have to go back to using a horse and buggy instead of an automobile, but I would prefer to go back to the kinds of governmental regulations or absence of regulations, the greater degree of freedom which was given to individuals to pursue one activity or another, which prevailed then (and) now.” ESR

LillyAnne Beatty is a Junior in high school entering her fourth year of competition with NCFCA, a competitive Speech and Debate league. She has competed in debate for the past three years, placing multiple times at both regional and national levels of competition. Her interests include public policy and economics, and hopes to one day attend law school and become a practicing attorney.

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