The following paper,
published here with the Institute of Economic Affairs, and entitled How Governments Harm Trade
(for the full version, see link at the bottom), is a paper in which I explain the principle behind why
in most cases the free market works best when governments do not interfere in
the prices society engenders by the laws of supply and demand. Those prices, I
will argue, reflect human choices played out on a day to day basis, and are the
soundest bottom-up basis on which economies are organised, not the top-down
organisations that politicians impose on us.
I will show how value is created in every societal transaction for both agents by the combination of consumer surplus and producer surplus. As this paper will also show, the main regulations one ought to be opposed to are ones that artificially interfere with prices and the information-carrying signals they exhibit.
On the issue of when it is
good or bad for the state to be involved in the free market, I use quite a
simple and obvious formula. It is this: the state should only involve itself in
our transactions when there is a net benefit to society from this involvement.
That is, when the benefits of doing so outweigh the costs.
When stated like that, I
would think it is hard to find a sane person who disagrees with that
proposition. The odd thing about society, however, is that it is full of people
who would find little trouble agreeing with the idea in its above propositional
form, but who quite comfortably hold numerous beliefs that depart from the
above logic. It is this societal anomaly that will be unpacked.
To read the full paper
click here
