Americans feel a great deal of faith in the free market.?

Question

Explain some of the weaknessess in the market. That is, where is free market to fail?

Answer 1

Free Market is code for  "big companies get to steal as much as they want". This jargon is used chiefly to DEREGULATE like what has happened with energy prices and the mortgage meltdown and the credit crisis.

Answer 2

There are really only three weaknesses in a free market system.

First, it does not adequately  address eveery economic necessity. When this happens economists call it a "market failure" For example, in the US we have a largely government owned and operated road system (which is thus "socialist" by definition). The reason is no one was ever able to devise an effective way of connecting users (car and truck drivers) with private firms so fees for use could be charged.  There are rare exceptions, of course (a few toll roads, mainly).  Not for lack of trying--in the early 20th century a lot of people tried to come up with a way to operate roads as private enterprise. None worked--yet, as an industrial society we HAVE to have these roads. So it became a government responsibility.  We do pay--but indirectly, through taxes.

Second, the processes of the free market can be subverted. The most well known example of this is the monopoly--a firm (or small group of firms) that gains virtual complete control of an industry and uses that position to exclude competitors and/or raise prices beyond what they would be if real competition were operating. Another example is the misrepresentation of products (we've seen a recent example of this in the imports of allegedly safe children's toys that turned out to have lead paint).

In either case--monopoly or false representation--it becomes necessary to have reguation/oversight of firms since the free market doesn't incorporate adequate safeguards.

The third weakness of a free market is related tothe second.  When carried out properly, the type of reguation/oversight needed  does not interfere with the market processes--in fact the opposite is the case.  The state regulatory efforts curtail unethical practices on the part of some businesses, allowing genuine competition to work the waay it's supposed to. However, that regulatory power can be misuesd--and all too often is. Sometimes its by well meaning reformers who try to shape market action to address what they perceive of as social needs.  Sometimes this is warranted, as when the government funds scientific and technological development that individual firms need, but aren't in a position to pursue because of the scale of the projects.  In suc a case the resulting technology creates economic benefits that outweigh the nominal departure from the free market model.  As often as not, however, suh reforms are either badly executed or are aimed at addressing the social equivalent of  subverted markets. Again, sometimes this is a valid move. For example, policies that seek to offset discrimination are appropriate in general --and if carried out properly acutallly improve free market practices by countering social factors (bigotry in this example) that create artificial barriers to market participation for some groups/individuals.

The most important aspect of this whole reguation issue is that reguations can be sued to protect favored businesses who have obtained (bought) the assistance of policy makers.  Again, we  are seeing a classic example of this with the fossil fuel industry.  Currently there has been a loud campaign (unfortunately successful in the short term) to make a gift of oil -bearing public lands to the oil companies.  Now--this might even be a justified move, given the critical part oil stilll plays in our economy. However, it wooed only make economic sense if a) it would bring down the current extremely high prices  which it can't since the time for any oil to be realized from these fields is years away and b) if the price rise were due to a supply shortfall --so that a supply increase would solve the problem. That is not the case--there is no shortage. However,  stakeholders in the oil industry have successfullly manipulated the concerns ofthe public and undue inlfluence on politicians to secure an extremely valuable property essentiallly for free.

Bottom line--the free market is the most effective way of organizing production anddistribution people have ever devised. Nothing else even comes close. But you have to recognize that it isn't a magic bullet--it does not work in every situation. And that there are dishonest people who will try to subverte the system, and oversight is required in order to keep the free market actually free.

Answer 3

The Free market is a myth.

"Free Trade" only works for U.S. Corporations because of 1) outsourcing labor to sweatshops in totalitarian states like China which has no worker rights and

2) protectionism at home-in fact U.S Economic strength was built over decades of U.S. protectionism.

"The case against Fannie and Freddie begins with their peculiar status: although they’re private companies with stockholders and profits, they’re “government-sponsored enterprises” established by federal law, which means that they receive special privileges.

The most important of these privileges is implicit: it’s the belief of investors that if Fannie and Freddie are threatened with failure, the federal government will come to their rescue.

This implicit guarantee means that profits are privatized but losses are socialized.

If Fannie and Freddie do well, their stockholders reap the benefits, but if things go badly, Washington picks up the tab. Heads they win, tails we lose."

Answer 4

232 years - still going strong and arguably the greatest nation the world has ever known. That's a pretty good foundation to base a great deal of faith in.

The more the government gets its tentacles into the system, the further we slide into socialism.

Answer 5

There is no such thing as free market. Its an illusion.

Lets just call a couple of words - Exxon, OPEC, Diamond Cartel, Microsoft Windows, Government, Lockheed, Boeing - you get the idea.