Why free market capitalism works

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"In the land of the blind, the one-eyed man is king"--Erasmus


The basis of free market capitalism are:

1) Private ownership of goods and services

2) Freedom to exchange these goods

This simple combination is extremely effective, because it incentivizes persons to maximize the resources they own. If you are a farmer all you have is based on the food you produce. If you want something you have to trade what you produce for it. The more you produce the more things you can trade for.

Enter scarcity and competition. Scarce resources are the basis of economics and an unavoidable fact of living on this planet. For example there is only so much beach coastline. There are 7 billion persons on this planet. It is impossible for them all to live on the beach due to the scarcity of beach coastline. While all resources have some degree of scarcity to them, it is only necessary for a few resources to be limiting to set the principle of scarcity.

Scarcity breeds competition. If there is a limited amount of some resource, and more people who want it than can have it they must either forcibly take it from others or make competing bids for the same resource. In a civilized society the resource goes to the person willing to pay the most for it and not the person willing to kill everyone else for it (this is why governmental forces are a necessary evil in capitalist societies as otherwise it devolves into feudalism).

Competition is what makes the market so damn effective as allocating resources. If someone wants something and is willing to pay more than you are able you have to produce more in order to outbid them. If someone does what you do more efficiently and sells the same good/service for less you have to sell the same as them and become more efficient to earn the same as you used to.

It has long been thought that the bane of capitalist society is monopoly. But, in actuality the only way monopoly becomes entrenched is through government intervention. This is because at the heart of it the only monopoly that actually matters is investor money. A few companies have become dominant forces in their markets. They have taken overwhelming market shares. In an industry like telecommunications where there are 3 giants (Verizon, AT&T, T-mobile-Sprint) what prevents them from fixing prices? The threat of investor entry. The illusion is that there are only 3 companies that are competing with each other. The fact is that there is an invisible waiting to be formed 4th company by investors if there is an opportunity to compete in the market. A price-fixing scheme creating artificially high prices would be one such opportunity.

You'll notice I started this post with a quote from Erasmus "In the land of the blind, the one-eyed man is king." In society there will always be outliers. Persons who figure out the system and how to beat it. In most other systems this person breaks the system. Instead in free-market capitalism this person is the system. At the end of the 19th century transportation was achieving unprecedented levels of connectivity in human society. Two men Richard Warren Sears and Alvah Curtis Roebuck figured out that they could reach more customers if they sent out a catalogue in the mail and then fill orders that were mailed back to them all over the country. The mighty Sears-Roebuck was formed and for nearly 100 years was the #1 retailer in the country. The Sears company is now bankrupt as a new competitor that embraced a new technology out-competed them. That competitor an online book seller started in a garage by a one-eyed man in the land of the blind.

pure capitalism only works if one is a pure capitalist [with natural entrepreneurial talents]. otherwise, one lacking such financially social talents is more likely to be exploited somehow by the smarter and stronger and luckier and faster. some people are "more at home" in a socialist or communist system, no matter what the capitalists think, especially those in the majority who were born on third base thinking they hit a triple [we all know who they are]. i think the northern european "third way" system, IOW "capitalism with a human face" [i.e. with a social safety net] is the optimum system relative to available human mental/spiritual bandwidth.

You're totally right about what an amazing thing a free market can be.

Please read a bit about what Marx wrote about capitalism, because you and he agree that it's the most dynamic, progressive force we have ever seen.
But he also saw what it did to the 99% who weren't born to capital owning parents.

mr bezos would have become the isaac newton of our generation had he not poured all his endeavors into that algorithmic garage-sale thing .

we are putting businesswomen and businessmen onto the same pedestals with great women and great men why ? and reagan was just a film actor who didnt understand anything.

https://www.youtube.com/watch?v=S4si1HaDmLg