A free-market economy is an economic system that depends on the market forces of supply and demand, without any control or intervention from any governments. It’s a complete opposite of a command economy where a central government agency controls and decides on supply and demand, which in essence means, the market does not have the freedom to operate freely. In a free-market economy, it’s the private firms and households who decide what goods are produced, where resources will be allocated, and who buys the goods. Economic experts define a free market as one where products and services are exchanged by willing buyers and sellers. Here are the most important benefits of a free market economy.
Increases innovation
A free-market economy encourages competition, which motivates entrepreneurs to continuously innovate their products and services. They create new products and technologies so that they can cope up with the competition while earning higher income at the same time. With money and competition as their motivating factors, they keep on doing their own research to identify popular trends, unlike a command economy wherein it’s the government who identifies the needs and trends of the consumers.
Increases efficiency
In any type of economy, people need money to buy goods and services. In a free-market economy, this drives the workers to increase their efficiency because they want to earn more money so that they can supply their needs, and be able to have a comfortable life. When there’s an increase in efficiency, there’s an increase in output for the economy. The opposite happens in a command economy where everything is set by a central authority or government, such as prices, wages, investments, levels of productions, etc. Workers in such an economy are less motivated, hence have lesser efficiency and economic output.
Optimizes resources allocations
Resources allocations in a free-market economy are optimized for better distribution and allocation. Producers of goods are very much willing to pay to acquire raw materials because consumers are also very much willing to pay for whatever quantity of a product they want. If this is not the case, producers may be producing goods that no one will buy. This free-market principle is a win-win for both the consumers and the producers. Producers can maximize their profits by selling their products at the lowest price possible, while the consumers benefit from these low prices.
While these benefits are great and important to enhance the global economy and freedom, it’s quite unfortunate that there is no existing purely free-market economy yet. But with the birth of Virie Market, the future may be closer than we think. Virie Market is a free-market economy in its purest form. Anyone from any part of the world can use its most user-friendly interface for buying and selling without any control from any central authority or government. It’s a pure peer-to-peer network where producers compete to be able to offer the best quality products at the lowest price possible. Check its whitepaper and download its application to learn more about it. This could just be the beginning of a true free-market economy.
