Free market question

kasse

In a free market, what happens to the people who lose their job in periods of bad conjuncture? To me it seems reasonable that the fall height is higher than in a welfare state.

CRGreathouse

Much higher. The employed make more money in a free market than an unfree market, and the unemployed get more money in a welfare state than in a non-welfare state.

I'm not sure what (absent charity) the solution is in a pure free market. Probably unemployment insurance, despite its moral hazard.

fleem

Yes, but there are fewer unemployed, those who are employed are more productive and make more money, the standard of living for everyone is higher (even unemployed), and there is better fairness over who has a job and who doesn't (i.e fewer freeloaders), and the community, friends, and relatives learn to help each other more rather than rely on the state (and they do it more fairly because they better know who is lazy and who isn't).

kasse

Social security is not a human right, and it ought not to be. Buy a private unemployment insurance, I don't see the moral hazard with that. Is it better to steel from employed people?

kasse

Why is that?

And what do you call a person who supports a free market? Conservative? Liberal? Liberalist?

fleem

The short answer is that the economy will simply be far healthier in a free market, and a healthy economy means jobs. The proof is in the pudding--its easy to see the historical correlation between free-marketism and wealth in the nations of the world. But there are rather obvious reasons for this. Here are a few:

1. Competition in the job market better matches employees with job requirements, resulting in more efficient operation. Forcing businesses to hire and pay people they wouldn't otherwise hire and pay, simply kills businesses.

2. Employees will be inspired to work harder because they'll be better rewarded for working hard.

3. Employees will be inspired to develop their skills more because if they don't, they'll end up with a lower-paying job. Rewarding everyone more equally reduces that inspiration.

4. Competence in industry inspires businesses to improve their product, making a free-market country competitive world-wide, and increasing the standard of living. Corporate welfare removes that inspiration.

5. Competence among regional governments (i.e. a federal government that keeps its hands out of local politics) causes those local governments to please their consituents/taxpayers more so they don't move away.

Certainly the free market has problems, but as I've said in other posts, some (not all) of those problems arise because we do not have a very free market in the west, yet the free-market naysayers blame freedom for those problems.

Libertarian comes to mind.

skeptic2

I don’t believe this is necessarily true.

From Wikipedia: “A free market is a term that economists use to describe a market which is free from economic intervention and regulation by government, other than protection of property rights (i.e. no regulation, no subsidization, no single monetary system and no governmental monopolies).”

Though a free market incorporates both positive and negative feedback mechanisms, the positive feedback ones seem to dominate. In other words more successful companies tend to become more powerful, eventually dominating the market and becoming monopolies.

This is more visible in the so called “banana republics” in which a few powerful companies have grown so powerful they control the government instead of the government controlling them. Powerful companies are able to maintain subsistence level wages which severely limit the options of the workers. Without government regulation companies are free to discriminate as they please and maintain the workplace as they want without regard to the safety of the workers. A worker who is fired often gets blacklisted and is unable to get another decent job. Older workers are let go and find it difficult or impossible to work. Without social security or welfare, these workers are found on the sidewalks begging for enough to eat.

skeptic2

Like women, minorities and the handicapped?

Why? Monopolies have no incentive for rewarding workers.

Perhaps, if the company has a need for employees with higher skills. If the only company in town is a coal mine, taking night courses may not be all that useful.

But a free market doesn't always result in competition and many times it suppresses it.

What?

In the U.S. the late 1800's and early 1900's many laws were passed limiting our free market, laws such as the Sherman Anti-Trust Act, the Clayton Act, the Interstate Commerce Act, and the Pure Food and Drugs Act. In addition many laws were passed prohibiting child labor, limiting the number of hours workers could be required to work in a day, mandating workplace safety, and minimum wages. Do you really believe we would be better off without this government regulation?

fleem

"free market" is not synonymous with "anarchy", yet your response above makes it clear you believe they are synonyms. i am not an anarchist, as you imply.

Most complaints against the free market stem (and rightly so) from fear of anti-competitive behavior. The reason people fear anti-competitive behavior like trusts and monopolies is because they know competition is needed! You just defended anti-trust laws because you value competition (along with laws against murder, theft, taking advantage of children, etc.)!

The solution is for the government to promote and defend competitive behavior. What is not the solution, is to make the government BE a monopoly in ALL markets! I'd rather have fat cats spending their time trying to figure out how to find loopholes in laws AND ways to improve productivity and product quality rather than have lawmakers tweaking those laws for their own benefit.

kasse

How come unemployed have a better standard of living in a free market than in a welfare state, when they don't receive the same support from and when those who work earn more than ever? It doesn't make sense!

turbo

Do you have any documentation to support this claim?

kasse

It was fleem's claim.

drankin

Because the unemployed might come from a free market country where everyone has a higher standard of living to begin with? Until they are hired again they can live on unemployment, sell possessions they've acumulated while working, have plenty of opportunity to do side jobs until employed again... there's money to be had in a free market economy when not doing your primary work.

turbo

Got any documentation, or are we expected to believe your assertions?

drankin

Just believe my assertions being someone who has done all of what I just wrote. LOL

fleem

Of course, the degree of freedom in a market is not easily measured and is easily debated, but here's something for starters. The correlation is strong, and you'd have to make some pretty outrageous arguments to claim the freedom ratings for the regions are almost all grossly inaccurate--which is what you'd need to do to refute the obvious correlation:

turbo

Correlation does nor imply causation.