Free your minds, and your markets

Written by Ronald Kitching

Sunday, 05 August 2007

Many people are opposed to free markets.

This is caused by a misunderstanding of the system. We are indebted to Vilfredo Pareto for a vivid illustration of the marvellous way the free market resolves the complexity of varied values and widely differing opinions of persons in the market place.

He calculated that for a small, simple society of only 100 persons trading only 700 goods and services, it would require the solution of 70,699 simultaneous equations in order to equate supply and demand in the manner the free market does so easily.

If one recalls how difficult is the task of solving only two or three simultaneous equations in algebra class, one will appreciate the task of solving 70,699! Not only that, but the equations keep changing all of the time for any number of reasons, including the ³whims² of every trader.

Yet this complex equation is easily solved by free exchange among persons who may be unable to count and who may not even read in some instances. When we remember that an average suburban supermarket can contain up to 25,000 items, imagine, in a society of tens or even hundreds of millions trading countless hundreds of thousands of items and services how impossible the task would be of keeping in touch with setting various and varying prices for the multitude of items which again, the market does easily and with impersonal effort.

Items on a supermarket shelf that do not move are impartially removed and replaced by those which the pubic are keen to buy. It took the USSR command system two generations to collapse. The Chinese, due to the diligence of Premier Deng guided by Emeritus Professor Gregory Chow, (Professor of Political Economy, from Princeton University), commenced Free Market reform in 1984.

Today China is already the leading economy in Asia and is tipped to surpass that of the U. S. by 2010.