Govt needs to play a very limited role in markets as human beings have natural rights that only a free market can protect; the two natural rights are right to freedom(as they enable individual to voluntarily exchange goods with others free from coercive power of govt.) and right to private property(as each individual is free to decide what will be done with what he owns without interference from govt.); Locke argued that if there were no govts.,human beings would find themselves in state of nature where each individual would be political equal of all others and would be perfectly free of any constraints other than law of nature;according to Locke law of nature teaches that each has right to liberty and no one can be put out of this estate and subjected to political power of another without his own consent; Weaknesses of Locke’s views
•(Abbott’s position based on Lockean view that private property is created by one’s labour and not by govt.—as Thai govt wanted to introduce a compulsory license) Free Markets: Adam Smith
•Father of modern economics and originator of utilitarian argument for free market; according to him when private individuals are left free to seek their own interests in free markets, they will inevitably be led to further the public welfare by an invisible hand(i.e. the market competition); •Market competition drives self-interested individuals to act in ways that serve society; when private individuals are left to seek their interests in free markets, they will inevitably be led to further public welfare by an invisible hand; •Market competition ensures pursuit of self-interest in market advances the public welfare which is a utilitarian argument; •Govt. interference in markets lowers the public’s welfare by creating shortages or surpluses; •Ludwig von Mises and FredrichA.Hayek argued that not only does a system of free markets and private ownership serve to allocate resources efficiently, but it is in principle,impossible for govt. or any human being to allocate resources with same efficiency; in a free market high prices indicate that additional resources are needed to meet consumer demand,and they motivate producers to allocate their resources to those consumers; if govt would have to try same thing it would have to know from day to day what things each consumer desired,what materials each producer would need to produce the countless things consumer desired; Criticism of Smith
•Rests on unrealistic assumptions that there are no monopoly companies; •Falsely assumes that all costs of manufacturing are paid by manufacturer •Falsely assumes human beings are motivated by self-interested desire for profit; •Some Govt. planning and regulation of markets is possible and desirable; •Most influential criticism of Smith came from John Kaynes; Smith assumed that without any help from govt automatic play of market forces would ensure full employment of all economic resources including labour;all available resources are used and demand always expands to absorb supply of commodities made from them(Say’s law); •Keynes argued that total demand for goods and services is sum of demand of three sectors of the economy: households, businesses and govt.; Keynes said Smith wrongly assumed demand is always enough to absorb supply of goods but if households forego spending,demand can be less than supply,leading to cutbacks,unemployment and economic depression; Utility of Survival of Fittest
•Evolution operates in society when economic competition ensures the fittest survive and unfit do not which improves the human race; •If Govt. intervenes in economy to shield people from competition,unfit survive and human race declines, so government should not do so •Spencer says those who survive in business are better than people those who do not; Free trade and Utility: Ricardo
•Ricardo using examples of England and Portugal demonstrated that both England and Portugal...