THE FREE MARKET

"Were we to be directed from Washington when to sow and when to reap, we should soon want bread."

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens."

"Every individual necessarily labours to render the annual revenue of society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own gain, and he is, in this, as in many other cases, led by an invisible hand to promote an end which was not part of his intention."

"The propensity to truck, barter and exchange one thing for another is common to all men, and to be found in no other race of animals."

- Adam Smith, The Wealth of Nations (1776) "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

In every country it always is and must be in the interest of the great body of the people to buy whatever they want of those who sell it cheapest.

What is prudence in the conduct of every private family, can scarce be folly in that of a great  kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it,  better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country, being always in proportion to the capital which employs it,  will not thereby be diminished... but only left to find out the way in which it can be employed with the greatest advantage.

By pursuing his own interest he frequently promotes that of the society more effectively than when he really intends to promote it. I have never known much good done by those affected to trade for the public good.

It is but too natural for us to see our own certain ruin in the possible prosperity of other people. It is hard to persuade us that every thing which is got by another is not taken from ourselves. Trade is not a limited thing; as if the objects of mutual demand and consumption could not stretch beyond the bounds of our jealousies.

        - Edmund Burke

"Man is a wicked animal. His wickedness must be organised."
        - Joseph Conrad

A spontaneous order is a system which has developed not through the central direction or patronage of one or a few individuals but through the unintended consequences of the decisions of myriad individuals each pursuing their own interests through voluntary exchange, cooperation, and trial and error.
This process of spontaneous evolution is not restricted to explaining the growth of the economic order but can also account for the development of language, money, culture, law, social conventions and even morals and ethics. Although the spontaneous order develops through individuals pursuing their own interest, the individuals still behave by following commonly held rules rather than by acting in a random fashion, and these rules are themselves the product of evolution.

        - Friedrich Hayek

The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.

"A policy of subsidizing failures will end in an economy strewn with capital-guzzling industries long past their time of profitability - old companies that cannot create jobs themselves, but can stand in the way of job creation." - George Gilder, "Wealth and Poverty" A successful economy depends on the proliferation of the rich, on creating a large class of risk-taking men who are willing to shun the easy channels of a comfortable life in order to create new enterprise, win huge profits, and invest them again. - George Gilder "Wealth comes from successful individual efforts to please one's fellow man....that's what competition is all about: 'outpleasing' your competitors to win over the consumers." "Those fighting for free enterprise and free competition do not defend the interests of those rich today. They want a free hand left to unknown men who will be the entrepreneurs of tomorrow..."

"Competition on the market aims at assigning to every individual that function in the social system in which he can render to all his fellow men the most valuable of the services he is able to perform."

"All people, however fanatical they may be in their zeal to disparage and to fight capitalism, implicitly pay homage to it by passionately clamoring for the products it turns out."

"Education rears disciples, imitators, and routinists, not pioneers of new ideas and creative geniuses. The schools are not nurseries of progress and improvement, but conservatories of tradition and unvarying modes of thought."

"Manufacturing and commercial monopolies owe their origin not to a tendency imminent in a capitalist economy but to governmental interventionist policy directed against free trade and laissez faire."

- Ludwig Von Mises Prices are little packets of information, signals if you will, to entrepreneurs. They tell the entrepreneur how to adjust resources in their production process so they can act in the most efficient manner possible (meaning: production with the least amount of waste). Prices are formed by everyone making decisions (based on their own subjective preferences) to buy or not to buy.
        - Paul Cwik

When the price of gasoline, or heating oil or natural gas or electricity, goes up, it is not evidence of a "crisis" or proof that consumers are being "gouged" or a reason to schedule congressional hearings or to fret that we are "running out of" a natural resource. It is simply the market signaling producers that there is money to be made by boosting supply. Invariably, the supply gets boosted and prices retreat. So why must so many pundits and politicians act as if a run-up in price is the first bitter taste of some looming catastrophe?
        - Jeff Jacoby, Jewish World Review

The free market (like democracy itself) can't function freely unless citizens have the facts they need to make informed decisions.
        - Jim Emerson

The only reason socialist economies can function at all is because their bureaucratic managers carefully monitor the pricing information available from free markets and then apply this Information to set their own prices... The great paradox of socialism is the fact that socialists need capitalism in order to survive.

The "Austrian" school of economics... especially emphasises the importance of the market as the best setting within which to grapple with the problems of imperfect knowledge. The market is seen as a search process, in sharp contrast to the idea of "perfect competition" which assumes for the purposes of theoretical elaboration that perfect knowledge is already available to all economic actors however lowly. One of the bases for the Postal Service's claims for its privileges is that it is bound by law to deliver mail everywhere in the country for the same price. That means that the guy who lives miles out in the middle of nowhere gets his mail deliveries subsidized by people who are mailing letters from New York to Chicago, which costs less than the price of a first-class stamp. But that is trying to justify one privilege by another. Why should someone who lives in isolation have someone else pay the costs created by his isolation? If the isolation is worth it, then let the person who benefits pay for it. That goes not only for the cost of delivering the mail, but also for the cost of delivering electricity, water and other things that cost more to deliver to someone living out in a desert or up on a mountain top.

    - Thomas Sowell, "The Mail Monopoly"

The "private sector" of the economy is, in fact, the voluntary sector; and the "public sector" is, in fact, the coercive sector.

There are two methods, or means, and only two, whereby man's needs and desires can be satisfied. One is the production and exchange of wealth; this is the economic means. The other is the uncompensated appropriation of wealth produced by others; this is the political means. "In the long run, exports must always equal imports. The only reason one gives up an object in trade is to acquire that which he does not possess but values more than what he is giving up; similarly, the only need for exports is to pay for the required imports."

        - David Osterfeld

Characterising proponents of the free-market as extreme is very common. The left do it because it simultaneously diverts attention from the catastrophe of 20th century socialism whilst exploiting that fact that our concern for the less well off usually exceeds our grasp of history or economics.

        - Paul MacDonnell, "Open Republic Institute of Ireland"

"It is, indeed, part of the liberal attitude to assume that, especially in the economic field, the self-regulating forces of the market will somehow bring about the required adjustments to new conditions, although no one can foretell how they will do this in a particular instance. There is perhaps no single factor contributing so much to people's frequent reluctance to let the market work as their inability to conceive how some necessary balance, between demand and supply, between exports and imports, or the like, will be brought about without deliberate control. The conservative feels safe and content only if he is assured that some higher wisdom watches and supervises change, only if he knows that some authority is is charged with keeping the change 'orderly'."

Political economy is about what is not seen.

        - Fredric Bastiat

Suppressing a market is a bit like squeezing a balloon — the trade will usually pop up somewhere else.

        - Steven Harford, "Slate Magazine"

One of the worst fallacies in the field of economics - propagated by Karl Marx and accepted by almost everyone today, including many businessmen - is the notion that the development of monopolies in an inescapable and intrinsic result of the operation of a free, unregulated economy. In fact, the exact opposite is true. It is a free market that makes monopolies impossible.

We who live in free market societies believe that growth, prosperity and ultimately human fulfillment, are created from the bottom up, not the government down. Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefitting from their success - only then can societies remain economically alive, dynamic, progressive, and free. Trust the people. This is the one irrefutable lesson of the entire postwar period contradicting the notion that rigid government controls are essential to economic development. Our system freed the individual genius of man, released him to fly as high and as far as his own talent and energy would take him.

        - Ronald Reagan

"Our alternative is either to stick to a moral tradition which we haven't invented, which most people cannot explain, and which economists can only retrospectively account for, in order to maintain the present four billion people living on this world, or to give up and allow a large part of this population to die of starvation. I very seriously believe that capitalism is not only a better form of organizing human activity than any deliberate design, any attempt to organize it to satisfy particular preferences, to aim at what people regard as beautiful or pleasant order, but it is also the indispensable condition for just keeping that population alive which exists already in the world. I regard the preservation of what is known as the capitalist system, of the system of free markets and the private ownership of the means of production, as an essential condition of the very survival of mankind."

"At the heart of economics is a scientific mystery: How is it that the pricing system accomplishes the world's work without anyone being in charge? How order is produced from freedom is a scientific mystery as deep, fundamental and inspiring as that of the expanding universe or the forces that bind matter. For to understand it is to understand something about how the human species got from hunting-gathering through the agricultural and industrial revolutions to a state of affluence that allows us to ask questions about the expanding universe, the weak and strong forces that bind particles, and the nature of the pricing system itself.
But what can we, as economists, say for sure about what we know of the pricing system? It would appear that after 200 years we know and understand very little. Incredibly, it is only in the last few decades of those 200 years that we have seriously awakened to the hypothesis that property-right institutions might be important to the functioning of the price system." Say's Law states that recessions are not caused by failure of demand (the Keynesian thesis), but by failure in the structure of supply and demand. Recession is precipitated by producers miscalculating what consumers wish to buy, thus causing unsold goods to pile up, production to be cut back, income to fall, and finally consumer spending to drop. If Thomas Edison invented electric light today, Dan Rather would report it on CBS News as "candle making industry threatened".
        - Newt Gingrich, US Congressman and House Speaker, 1995

We all know how it is being a kid. You have a certain amount of money to spend and you want to maximise your return on that money. In a sweetshop situation, the stupidest of children suddenly become mathematical and strategic geniuses. They become like little economists as they weight up various options in the light of their limited resources. They prioritise some things over others and come up with a mix that satisifies lots of conflicting needs. (A few less cola bottles and I can have that Refresher). And they figure out the cost of it all down to the last penny.
        - Brendon O'Connor. on sweetshop economics, "The Irish Independent"

"And while the law of competition may be sometimes hard for the individual, it is best for the race, because it ensures the survival of the fittest in every department."

- Andrew Carnegie "Big companies are not as omnipotent as they seem. Not one of the world's ten biggest firms by market value a decade ago is still in the top ten. The world's biggest firm, the US's Cisco Systems, was founded in 1986. Europe's largest companies, Britain's Vodafone and Finland's Nokia, were minnows a decade ago."

     - Philippe Legrain

BIG BUSINESS & REGULATION

Regulation - which is based on force and fear - undermines the moral base of business dealings. It becomes cheaper to bribe a building inspector than to meet his standards of construction. A fly-by-night securities operator can quickly meet all the S.E.C. requirements, gain the inference of respectability, and proceed to fleece the public. In an unregulated economy, the operator would have had to spend a number of years in reputable dealings before he could earn a position of trust sufficient to induce a number of investors to place funds with him. Protection of the consumer by regulation is thus illusory.

- Alan Greenspan The self-interest of businessmen is sufficient to ensure that honesty (or at least the appearance of honesty) will continue to exist.The corporation that requires a high degree of honesty and civility in its customer service, or the firm that immediately takes a defective product off the store shelves are not acting altruistically:
each has a long term interest in a reputation for honesty, reliability, quality and fairness. These virtues become economic assets and as such are sought after
by individuals and firms interested only in the bottom line.

    - Francis Fukuyama, "The Great Disruption"

The minimum wage law very cleverly is misnamed. The real minimum wage is zero. That is what many inexperienced and low skilled people receive as a result of legislation that makes it illegal to pay them what they are currently worth to an employer.

    - Thomas Sowell

Go into the London Stock Exchange - a more respectable place than many a court - and you will see the representatives of all nations gathered there for the service of mankind. There the Jew, the Mohammedan and the Christian deal with each other as if they were of the same religion, and give the name of infidel only to those who go bankrupt. There the Presbyterian trusts the Anabaptist and the Anglican accepts the Quaker's Promise.

    - Voltaire

"There were in this country two very large monopolies. The larger of the two had the following record: the Vietnam War, Watergate, double- digit inflation, fuel and energy shortages, bankrupt airlines, and the 8-cent postcard. The second was responsible for such things as the transistor, the solar cell, lasers, synthetic crystals, high fidelity stereo recording, sound motion pictures, radio astronomy, negative feedback, magnetic tape, magnetic "bubbles", electronic switching systems, microwave radio and TV relay systems, information theory, the first electrical digital computer, and the first communications satellite. Guess which one got to tell the other how to run the telephone business?"

- Unknown "Businesses want regulation because it protects from the risks of dynamic competition." "The worst victims of heavy-handed regulation are, of course, small businesses on which the real strength of any economy depends. Over-regulation can be managed by the largest companies. Indeed, it is often to their advantage as it makes life much harder for the new entries to their trade."

        - Lord John Sainsbury

"We’re the most regulated deregulated industry in the world."
        - Anonymous Airline Executive

"If you're a small businessman, you have to get involved in government or government will wreck your business."

        - Jack Faris, President, National Federation of Independent Business

Things that are bad for business are bad for people who work for business.

- Thomas E. Dewey "The average annual cost of regulation, paperwork, and tax compliance for firms with fewer than 500 employees is about $5,000 per employee. Firms with 20 to 49 employees spend, on average, 19 cents out of every revenue dollar on regulatory costs." A basically dishonest man can survive longer in the church or the clasroom than he can in the grain exchange or the furniture business. In your town, your reputation counts; in another, your clothes do. It never seems to occur to anyone that the more power you vest in politicians and other public officials, the more opportunities for corruption you give them. If you give a politician the power to enrich himself through a rezoning decision, you put a big temptation in his way.
Maybe the real answer to corruption is not more rules and regulations, but fewer. Maybe the main source of corruption is not greedy businessmen and politicians, but a public sector that has been given too many decision-making powers..
        - David Quinn, "The Times"

If in the criminal law it is wrong to punish people unless they have been proven guitly of a crime, why is it right that government regulations may impose enormous economic burdens on people who have done nothing wrong? Isn't this a kind of prior restraint that has no place in a free society?
If the 14th Amendment prohibits the unequal application of the law, why are producers prohibited from discriminating, while consumers can do so with total impunity? And why can government regulate every profession but the press, arts, and clergy - is this not a built-in inequality, a state-sponsored discrimination?

"There's a widespread belief and common conception that somehow or other business and economics are the same, that those people who are in favor of a free market are also in favor of everything that big business does. And those of us who have defended a free market have, over a long period of time, become accustomed to being called apologists for big business. But nothing could be farther from the truth. There's a real distinction between being in favor of free markets and being in favor of whatever business does." "Businessmen who ask for tariffs, quotas, and other barriers to free entry and competition cannot logically criticize strikers who threaten or use force to keep others from jobs the strikers have vacated. The latter claim ownership of those jobs, whereas, protectionists among businessmen claim the ownership of customers and their trade. There is no difference in principle; coercion is employed in either case. Each restricts our freedom to exchange goods and services." There has grown up in the minds of certain groups in this country the notion that because a man or a corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary public interest. This strange doctrine is not supported by statute nor common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back, for their private benefit. - Robert A. Heinlein, "Life-Line" Many other countries have made the mistake of mandating costly employment benefits, and they have mandated their citizens right out of jobs. The best minds are not in government. If any were, business would hire them away. Most advanced countries would benefit by having longer working hours. The proof of this lies in what happened to France between 1936 & 1939. In 1936 a 40 hour week was introduced. Industrial output fell, unemployment and inflation increased and purchasing power was cut. In 1938 the hours of the working week were increased by the abandonment of regulations curtailing them. The number of unemployed dropped. Production rose 15%, exports 17% and the increase in prices slowed. The lesson implicit, wrote the French sociologist Alfred Sauvy, should be taught to students of political economy as the battles of Austerlitz and Tannenburg are taught at military academies. It never has been.
        - Hugh Thomas, "An Unfinished History of the World"

Almost all large companies have call centres now. They are lean and efficient. They cut costs, boost profits. They are also, according to the Future Foundation, the leading cause of frustration in the British Isles, topping rush-hour traffic and delayed trains as the UK’s most stressful experience... When I opened a NatWest account, I would routinely ring the branch and talk to someone who knew me, but that was before the advent of call centres, which enabled banks to shave backroom costs by up to 30 per cent and boost profits to their present record levels. The only thing rising faster than bank profits (up 15 per cent in 2005) is complaints about bank service, up 50 per cent in the same year, according to the Banking Code Standards Board. One gathers that many of these complaints involve call centres, and that bank bosses are concerned. In a better world, banks would simply improve their service, but some have instead turned to ‘queueing theory’, a branch of mathematics that enables you to calculate how much torture a customer can take.
        - Rian Malan, "The Spectator"

Amid the mayhem on world financial markets, it is becoming clear that capitalism's most dangerous enemies are capitalists. No one can have watched the "subprime mortgage" debacle without noticing the absurd contrast between the magnitude of the failure and the lavish rewards heaped on those who presided over it. At Merrill Lynch and Citigroup, large losses on subprime securities cost chief executives their jobs -- and they left with multimillion-dollar pay packages. Stanley O'Neal, the ex-head of Merrill, received an estimated $161 million. Everyday Americans will conclude (rightly) that this brand of capitalism is rigged in favor of the privileged few. It will be said in their defense that these packages reflected years of service, often highly successful. So? It's not as if these CEOs weren't compensated in all those years. If you leave your company a shambles -- with losses to be absorbed by lower-level employees, some of whom will be fired, and shareholders -- do you deserve a gold-plated send-off? Still, the more serious problem transcends the high pay itself and goes to the wider consequences for the economy. Wall Street's pay practices perversely encourage extreme risk-taking that can destabilize the economy. Subprime mortgage losses may simply be chapter one.
        - Robert J Samuelson, "The Washington Post" (Jan'08)

# ENTERPRISE

Competition is a by-product of productive work, not its goal. A creative man is motivated by the desire to achieve, not by the desire to beat others.
        - Ayn Rand

There are no such things as limits to growth, because there are no limits on the human capacity for intelligence, imagination and wonder.
        - Ronald Reagan, 1983.

At the end of the 1980s two American academics, Jim Collins and Jerry Porras, began to research what they termed “enduring great companies”, ones that had been successful for decades — companies such as Disney, Sony, 3M (without whom no Post-it note), Marriott and Hewlett-Packard. The authors’ aim was to identify the characteristics that these companies all share and that distinguish them from others. At the heart of the book is this assertion: visionary companies are about “more than profits”. Profits are vital, but “they are not the point of life”. Instead, companies adhere to core values and purpose, a core ideology that gives the company its character and its reason to be. Around the maintenance of these values, a fanatically disciplined, cult-like organisation is built. Everything can change, everything must change, but not the core ideology. However, Collins and Porras argue that the biggest mistake you can make is to fail to distinguish between core ideology and non-core practices. Take IBM. The “three basic beliefs”, as defined by the founding fathers of that company, are “to give full consideration to the individual employee, spend a lot of time making customers happy, and go the last mile to do things right”. As the authors observe: “Nowhere do we see anything about white shirts, blue suits, specific policies, specific procedures, organisation hierarchies, mainframe computers — or computers at all for that matter”. Or take the Disney Corporation. Part of its core values and purpose was “to bring happiness to millions” and to promote “wholesome American values”. It did not define itself as a film company just for children. Good thing too, or we wouldn’t have had Touchstone Pictures. Indeed, it didn’t define itself as a film company at all. Good thing too, or we wouldn’t have had Disneyland.
        - Daniel Finkelstein, "the Times"

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