Voluntary Exchange

Thoughts on a free market economy… 

“Voluntary Exchange”

By  Phyllis Hunsinger

November 19, 2013            

 Each time we go to the grocery store, a restaurant, or a fast-food service there appears to be an abundance of food available.  Have you ever wondered how this bountiful supply exists?  How do the managers know how much food to put on the shelves, in the storerooms, and on the menus?

Supply and demand might be a quick answer to the above question; however, what does that mean?  Supply is the amount that producers are willing to produce at various prices.  Demand is the driving force behind supply.  But, the underlying concept of supply and demand is voluntary exchange.  People must be free to choose how to spend their time and their resources.

Adam Smith in The Wealth of Nations analyzed the way ” a market system could combine the freedom of individuals to pursue their own objectives with cooperation and collaboration to produce food, clothing, and housing.”  Adam Smith recognized that the prices that emerged from voluntary transactions between buyers and sellers, i.e., a free market economy, could coordinate the activity of millions of people, each seeking his own interest, in such a way as to make everyone better off.

So in the case of the above food example, voluntary exchange enables millions of people to cooperate with one another to supply and to purchase food.  Voluntary exchange guarantees that when businesses provide what consumers want at an acceptable price, the supply continues and the business survives. The demands of the consumers determine the supply provided the consumer and the supplier maintain the ability to engage in voluntary transactions, the key to a free market economy.

 

https://www.free-dom.us.com, Phyllis Hunsinger, © 2013, All Rights Reserved

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