Why free market system brings efficiency as well as freedom?

Answer 1

There are many benefits to a free market.

The obvious answer is the first word 'free'. In a free market consumers and producers are free to enter in to any occupation they want to. They are free to agree to trade anything that can be owned at any price that is mutually agreed upon.

The main tangible benefit is efficiency. Markets aren't perfect, but they are better than any other system.

Perhaps the simplest answer is to think of a free market as a giant Wiki. The world is an extremely complex place with information dispersed among all the inhabitants. The free market allows each person to use his or her information to affect what they are willing to pay for something, which in turn affects how much demand there is for an item which affects how much one can earn from producing it which affects the number of people who decide to produce that item as a career.

Free markets can be distorted. People often don't make rational choices. Knowledge costs time and money to acquire and disperse, though the cost has come down significantly with the internet (consider the time and effort to compare prices and get reviews on an item now as compared to 20 years ago). Sometimes knowledge is held up for other reasons. But once the information does become available the free market is very efficient at incorporating that information into the price of an item. Though not perfect, it is the most efficient economy around and more importantly preserves the Liberty that the United States was founded on.

More often it is the government that distorts the market, often with good but misguided intentions. Because of this, the United States in NOT truly a free market. Our economy is based on a free market system but so many of the freedoms have been legislated away, often at the behest of businesses. Price supports for farmers, having to get licenses to enter certain professions (not just doctors but hair weavers and yoga instructors and many more), the ethanol program, corporate welfare, access to drugs, etc. have all impaired the ability of the market to work as well as it could in the United States.

For further information I recommend Reason.com, Cato.org, and IJ.org.

Answer 2

The free market system allows the market to govern itself, not the government like it would in a more mercantile system. Adam Smith, an 18th century economist- and likely the first one- was an advocate of free market regularity and actively promoted the creation and self-maintenance of the free world's economies, via the "invisible hand".