Thursday, February 11, 2010

The Beauty of the Free Market

“The cyclical fluctuations of business are not an occurrence originating in the sphere of the unhampered market, but a product of government interference with business conditions designed to lower the rate of interest below the height at which the free market would have fixed it." 
~ Ludwig Von Mises ~

Balance: A foreign concept to most governmental institutions, but a close companion of the free market. When government steps in (with admirable motives) and attempts to address a problem, more often then naught, balance is disregarded. Allow me to explain this concept in more detail. Take the recent health care dilemma. No doubt, the system is in need of some change (although, despite its faults, the US health care system is one of the best in the world). But the question to ask ourselves is not "What kind of regulations should the government impose upon the people?", rather we would benefit far more by considering the question, "How can the government encourage a market solution?" I will further expound upon this idea through the following statement; Government intervention betrays balance.  

Consider the health care example; for decades the US government has imposed stringent requirements upon the health care industry; these regulations, are in large directed towards the protection of American citizens. Unfortunately, good intentions don't make good policy. With a plethora of needless requirements and cumbersome paperwork, health care businesses face perverse incentives and a market plagued with distortion. Perhaps the government should divert its focus to competition, and encourage the market to address the health care dilemma. It wouldn't take much for the industry to receive a substantial boost. Its simple; with less red tape in the system, an increase in efficiency will undoubtedly occur. Not only can the market address health care in an expedient manner, but it can do so in a balanced manner.

When Federal officials impose costs upon the health care industry, in order to achieve "public safety", they do so at the sacrifice of economic prosperity and entrepreneurial innovation. If the system is packed with bureaucracy, then there are less incentives for consumers to increase the quality of care or explore more efficient alternatives.

The market, in contrast, approaches this dilemma from a balanced perspective. It not only considers economic prosperity, health, and safety, but it is also built upon a foundation of balance. In a free market, wealth is created. Wealth creation occurs when one individual helps out another, resulting in a voluntary exchange which makes both parties better off. The argument that governmental standards are necessary to ensure safety is largely capricious. In a free market, the quality of health care will essentially determine profit. If the quality of your care is poor, than consumers will not be attracted to this establishment. The reverse is true as well: If a business provides quality, customer centered care at a reasonable price, then consumers will be inclined to do business there. Competition raises the standard of excellence, and this should be the primary focus of civil authorities.    

One more thing, another facet of mammoth federal regulations also affect the health care business: federal drug regulations. A business cannot provide cheap health care if the products it relies upon for success must undergo stringent and needless processes. It is almost amusing, that the very establishment that is attempting to lower prices for health care is in fact doing the opposite. Just another testimony to the efficiency of government!

There is no doubt, the market can solve the problem. The government must simply take a step back, and allow to free market to fill the gap. Not only will the market fill the gap, but it will do so in a balanced manner. In its ideal environment, the free market is indeed a beautiful thing.

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