The market mechanism is a remarkable process. Buyers and sellers exchange money in an open system that produces prices and production levels to equate supply and demand. (Also known as Keynes’ invisible hand, the market mechanism is an alternative to central planning.) Chinese leaders added the market mechanism to its communist political system, and economic growth skyrocketed. In theory, the market mechanism leads to an ideal allocation of goods, services and workers’ efforts for society. In practice, ideal output misses the mark when prices fail to reflect societal benefits and costs, consumers are not well-informed, or monopolistic-like power exists. One area where the market mechanism often fails is healthcare. A healthy population benefits everyone, from employers in need of a productive workforce to the government (and taxpayers) who cover the costs of the social safety net to each of us as individuals…
The myth about markets
If this election is to be a national vote on the role of government versus markets to advance our nation’s wellbeing – as pundits suggest it is – it’s best that we step back to discuss what markets can and cannot do. In the process we will hopefully remember that we all benefit from a vibrant private sector and that government plays a vital role in its creation. Economists rightly applaud the role of markets and price in particular as the invisible hand that aligns demand and supply. Compare the economies of West Berlin and East Berlin before the fall of the USSR and you can see the power of price and free markets versus a planned economy in creating an economy that responds to people’s needs. Yes there is beauty in the invisible hand, and it generates significant national wealth. But the…