If the Glove Fits, You Must Acquit

invisible-hand

“The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.”

~  Milton Friedman

This Friedman quote reveals the inherent fairness and equitable nature of the economic system called “capitalism.” It indicates the concept of value is a universally understood proposition and trade is the only true universal language. If you have something I want and you are willing to sell it to me, the focus is on the transaction not the social status, race, religion or ideology of the parties to the transaction. The only thing that matters is that we reach a price where you are willing to sell and I am willing to buy. Personal bias takes a back seat to the needs, wants and desires of the parties and the primary focus is on the transaction itself. Your price represents your choice of a point that satisfactorily meets your needs and my price represents the value I seek in obtaining the item. When those two prices are the same, there occurs something called a “transaction.”

In all other economic systems, there exists the perversion of that free choice by some entity – and that entity will always be inherently arbitrary and capricious. I use the term “arbitrary” because these entities are never a direct party to the transaction, they derive no direct benefit from it and often act without knowledge of the transaction. “Capricious” because their actions most often have no direct connection to the transaction – they act in ways unrelated to the specific transaction based on other motives, they are fickle. To use a quaint Southern euphemism, they don’t have a dog in the hunt. All other economic systems rest on some degree of this arbitrary and capricious entity making decisions of price, supply and demand and acting as if these three aspects of every transaction are totally disconnected. They are not and never can be separated or isolated from one another. This is why there may be a shortage of bread at five cents a loaf but plenty of bread at five dollars a loaf, this is the market using price to signal that demand is outstripping supply – the reaction in a free market is for the value chain to kick into gear and increase supply and then price begins to fall. Only an arbitrary and capricious entity that willfully ignores this interrelation of price, supply and demand can create a shortage of bread at any price – that is why a hamburger in Caracas now costs the equivalent of $170 USD and the stores have no basic products – i.e. toilet paper.

Classical liberals believe that personal freedom is directly related to economic freedom. We believe so because the very basis of human existence relies 1) on personal “production” or the ability of the individual to create something of value (be it labor or intellect), 2) that personal output belongs to the individual to do with as they desire and 3) to obtain other necessities of life and to improve the human condition, individuals must trade with each other to maximize the value of different skills, abilities, needs, wants and desires.

Invisible handIt is logical to assume that societies are representative of the economic systems employed. If the economic system is inherently controlled, then it follows that the society surrounding it must also be controlled. If the economic system is free, society will also be free. One follows the other, hand in glove and the greatest freedom in history has been achieved when it is Adam Smith’s “Invisible Hand” in that glove.

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One thought on “If the Glove Fits, You Must Acquit

  1. The exchange between the seller that agrees to the price and the buyer that does so also is sometimes screwed up by the govt adding it’s fees.

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