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Who should set prices? State vs. Free Market

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Who should have the authority to set prices? The free market, or the State? This has long been a controversial topic, and I believe it should be addressed. Many argue that, “without the civil government regulating prices, then people will get ripped off by evil capitalists!” This, however, is far from being the case.

When you go to a store, you are basically coming to look for the best deal on whatever you want to buy. You are extremely mobile; the business isn’t. If you don’t find a good deal, you can just walk out the store and go to another one. If you can’t, something else is wrong!

What am I driving at? Well, in a free market, there will be multiple people offering a product, and they all want your business. This means that they will be competing against other businesses, not YOU, other businesses, trying their best to be better than the others. This is free market competition. Consumers compete against consumers, corporations and businesses against each other, and so on. This means that prices will always be lower, because if people don’t like the price and another place has a better one, they will give that other place their business.

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However, lets say, that there is only one store in the entire world that sells rainbow spectrum gum. There happens to be a large market for this special kind of gum; its flavors sprawl from juicy strawberry to tangy mango. Its the best thing since sliced bread, and other entrepreneurs know this. Unless the inventor of the recipe patented his recipe, using the power of the State to keep other people out of the market, then others will come and supply more rainbow spectrum gum. What happens when there is more of something? Prices drop, because there is more of it. Because competition has begun in this market between the original inventor and other entrepreneurs, the consumers will benefit.

But, lets take it from the other direction. The government tells businesses that they cannot sell gum for over 1.00 for a 5 oz. package. A lot of Mom and Pop gum brands go out of business, and only a few government subsidized or extremely large gum manufacturers survive, but, the quality of gum goes down universally. This, my friends, is what almost always happens when you get government sticking its nose into things.

So, forcing businesses to not exceed and not go under a certain price for anything is just as bad as making everybody buy something. Price control is not only unnecessary, its wrong, and it doesn’t work anyway. With the government setting prices, we suffer either a shortage or a surplus (waste). Supply and demand, is and will continue to be the only really effective way to determine prices. Apologies to Socialists, Communists and Fascists everywhere. The free market wins every time!

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2 responses

  1. Heidi

    Very well done! You have a great voice to your writing and give nice, illustrative examples!

    November 13, 2013 at 5:49 am

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