Is The Free Market Chaotic?

With billions of people on planet earth, all pursuing their own best interest, you would expect things to be chaotic right? Wrong.

In order to wrap your head around this issue, you need to think in terms of individuals. Once big numbers like billions creep into your mind, things can get a bit overwhelming.

So, let’s ask a different question. Do you think that most people are capable of organizing their own lives? Most people that I know certainly are. They may not be rich or hyper-successful but they can get their bills paid, feed themselves, earn a living, and generally bring forth some measure of happiness and contentment.

In order to organize our lives, we are forced to cooperate with many other people. When we pay bills online, we are utilizing a system built by another individual. The shelves at the grocery store are packed by workers. The products were made in a factory somewhere with machines and human energy.

We spend time with friends and family not out of obligation but because it brings us pleasure.

Nobody forces business owners to invest in machines. Workers are not coerced into stocking shelves. In the process of eliminating chaos from their own lives, they necessarily contribute to well being of others.

Knowingly or unknowingly, each individual plays a part in eliminating chaos from the world. When individuals are left free to pursue their own interests, the entire world can quickly organize itself. The self organizing mechanism writ large brings harmony to the world.

The free market is nothing but a name for unfettered human interaction. As humans interact and make exchanges with each other, prices begin to emerge. Prices are indications of how strongly people desire certain goods and services. If a good is particularly valuable to a large number of people, the price will rise. In other words, people will voluntarily depart with a greater quantity of resources to obtain the good. This tendency will be magnified if valuable commodities are in short supply.

Individuals, in the process of organizing their own lives, will see that it is to their benefit to bring forth highly valuable goods. In this way, prices coordinate the actions of individuals on the market. As more and more valuable goods are brought to market prices will decline. More people will be able to get satisfaction from the things they most desire.

However, this world of self organization can be disrupted. There are two ways in particular that chaos can be injected into the free market. One is violence. The second is central economic planning.

In order for people to properly organize their lives, they must feel secure in their possessions. Planning is always a future oriented operation. If you feel like you could be killed or robbed anytime, planning for the future becomes senseless. Likewise, if you are not secure in your property it much less likely that you will make plans for the wise stewarding of that property. Violence against person and property must be checked for the free market to function. War is especially harmful.

Central economic planning substitutes the desires of the planner for the desires of each individual. Instead of a world that is best organized and harmonized for the benefit of all, a world is created for the benefit of the planners. Individuals are unable to efficiently and accurately fulfill the best interests of their fellow man. Accurate prices that reflect reality are needed. Taxation, subsidies, money printing, tariffs, price floors and ceilings, and a host of other economic interferences introduce chaos into an otherwise rational environment.

We see that the free market is not chaotic at all. Quite the contrary, when individuals are left to plan their own lives, order and rationality permeate. Only such a system can bring about a world where billions of individuals live in harmony with each other.

The alternative is violence, insecurity, irrationality, and chaos.

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