Wealth

Part 6 - Market Economies

https://www.youtube.com/watch?v=dJRA7y2XN9c

There are many reasons for the development of our civilization. Some of the great discoveries are fire, tools and, more recently, technology, productivity and science but none of these has given us our enormous wealth and infinitely better lives.

By far, the most important reason (which is part of our everyday lives,   is often overlooked   and grossly misunderstood) for all benefits is . . . the Market Economy.

Investopedia describes a market economy as one where consumer preferences and resource scarcity determine which goods are produced and in what quantity. Prices in a market economy act as signals to producers and consumers who use these price signals to help make decisions.

 Something is worth precisely what someone is willing to pay. Despite periodical destructions of wealth (caused by contagious ideologies like communism, criminals, wars, famines, diseases, incompetence and corruption) the average citizen of a civilized country is rich beyond the dreams of any emperor and the poor of most countries are many times wealthier than they were 100 years ago. 

 Sure, kings and emperors had more gold and big palaces but they could not watch a TV show or have a video chat with someone on another continent. They could not fly half way round the world in less than a day. And, no gold plated horse drawn coach compares to the speed and comfort of a modern car. 

And, they often died early and suffered from terrible diseases which most people living today never knew existed.

Market economies began when our remote ancestors started trading food and objects with unrelated people. We know they traded amber, obsidian, sea shells and ochre more than 100,000 years ago, long before they started growing crops and raising animals for food, leather and wool. Since few people dared to travel outside of their tribal territory, trade was typically conducted at mutually recognized places on territorial borders; the first market places. 

This was long before anyone seriously considered letting the government make all the decisions although leaders were often asked to enforce rules to protect sellers and buyers. With the development of agriculture, populations grew larger and collected in villages. Local trade created a need for local market places and market days when buyers and sellers could meet. When a farmer wanted to slaughter a pig she often needed something else to eat and someone else to eat the rest of the meat before it rotted. So she took the pig to the local market place on market day and found other people willing to exchange part of the pig for vegetables or shoes or clothing before she killed and cut up the pig. 

As the market became larger sellers and buyers devised ways to measure quantities, and relative values (one pig might be worth 50 live chickens so one chicken was worth one fiftieth part of a pig) and also to record transactions so there was no later arguing that the buyer or seller had been short-changed.

Since the Industrial Revolution many, even well educated, people have demanded wholesale changes to the free market economy. They want to make radical changes to the very system that has delivered unprecedented wealth, health and longevity and has easily withstood every test.

The free market economic system may not be perfect but, to misquote Winston Churchill, it is far better than anything else that has been tried from time to time.