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Free market question

  1. Aug 2, 2009 #1
    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.
  2. jcsd
  3. Aug 2, 2009 #2


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    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.
  4. Aug 2, 2009 #3
    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).
  5. Aug 2, 2009 #4
    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?
  6. Aug 2, 2009 #5
    Why is that?

    And what do you call a person who supports a free market? Conservative? Liberal? Liberalist?
  7. Aug 2, 2009 #6
    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.
  8. Aug 2, 2009 #7
    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.
  9. Aug 2, 2009 #8
    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.


    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?

  10. Aug 2, 2009 #9
    "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.
  11. Aug 2, 2009 #10
    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!
  12. Aug 2, 2009 #11


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    Do you have any documentation to support this claim?
  13. Aug 2, 2009 #12
    It was fleem's claim.
  14. Aug 2, 2009 #13
    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.
  15. Aug 2, 2009 #14


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    Got any documentation, or are we expected to believe your assertions?
  16. Aug 2, 2009 #15
    Just believe my assertions being someone who has done all of what I just wrote. LOL
  17. Aug 2, 2009 #16
    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:

    http://www.heritage.org/Research/InternationalOrganizations/images/chart1.gif [Broken]
    Last edited by a moderator: May 4, 2017
  18. Aug 2, 2009 #17


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    Correlation does nor imply causation.
  19. Aug 2, 2009 #18
    Why do you even make this statement? Does being a woman or a minority make you an inherently worse pick for a job? This is borderline racism. If you force businesses to employ people because of quotas and not ability you do tie the hands of the companies. If racism is a problem with some companies than others will come along and swoop up the best qualified people that were ignored. Lots have companies have prospered on resources that others have ignored and in the process they have changed how business is done, personnel are a resource like all others.

    Why the monopoly comment? If a company is free to hire/fire employees as the wish and to give raises as they wish then the best people will get the best pay at the best companies. Now there may still be companies that treat their employees badly, but they won't stand a chance in the long run against happy productive employees. Even in monopolies there is always a threat of having your workers taken by other industries. If you don't pay them enough they will leave and you will be left with the worst workers available for what you pay.

    If you work in a coal mining town and want a better job then you move. If enough people move then the mine either can't operate or they raise the pay and the price of coal. Having only one job available is never a good excuse for not moving up.

    So when companies lobby to have the government create artificial monopolies this is better than having a huge company that can do things better than smaller companies? Yes I admit that having a bad monopoly is possible in a truly free market, but it is inherently short lived. If you corner the market on sprockets and then raise the price enough, sooner or later someone is going to take the risk and start producing his own sprockets. Without artificial monopolies there is no way to permanently prevent competition. The government is the only power that can prevent you from making something, because they have the monopoly on force.

    Some government regulation is a good thing such as child labor laws, but for the most part it solves problems that would have solved themselves. Minimum wage establishes itself without government mandate. If you raise the minimum wage then the money has to come from somewhere. The owners either cut profits (less profits in an industry means less growth and fewer jobs), they cut employees (again fewer jobs), or they raise prices which means that everyone who buys from them effectively takes a pay cut. On the other hand, there is truly a minimum you can pay employees before you can't get anyone to work for you, and in many places it is ABOVE the minimum wage.

    I'm really tired of the idea that there is some magic evil rich person somewhere and when we raise taxes or minimum wage or increase regulations they just pull some extra money out of their pocket. There is no magical person. Most of us own businesses in the form of IRAs or other retirement investments. All of us pay the tax burden of the rich each time we buy something. The only person who gets stuck with the bill is the working person. Trying to stop free market because of inequities will eventually make everyone equal, but we will all be equal and poor.
  20. Aug 2, 2009 #19
    Yes it does.

    Perhaps you meant to say, "Correlation does not imply a certain direction of causation". If that's what you were trying to say, then I guess you meant that possibly wealth breeds freedom of economy, rather than freedom of economy breeding wealth. Actually, I believe both occur. What was your point? That it is far more likely that wealth breeds freedom and extremely unlikely that freedom breeds wealth? You make such an off the wall statement (which also gives your argument nothing, to boot!) and then demand I give statistics? (Which I did with bells on, by the way!).
    Last edited: Aug 2, 2009
  21. Aug 2, 2009 #20
    I've heard this idea before that the free market supposedly takes care of monopolies on its own but I have never seen a rationale for this. You say that some brave entrepreneur will come along and start a competing business. What happens when the monopoly tries to buy them out of chase them out of business? Monopolies are really quite good at mantaining themselves through various forms of legal coercion.
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