One of the great virtues of the free market is the way it coordinates the activity of millions of individual economic actors without a centralized authority and for the benefit of all. As Adam Smith wrote, one “intends only his own gain” but “in this … is led by an invisible hand to promote an end which was not part of his intention.” According to Milton and Rose Friedman in their incisive book Free to Choose, “Adam Smith’s flash of genius was his recognition that the prices that emerged from voluntary transactions between buyers and sellers—for short, in a free market—could coordinate the activity of millions of people, each seeking his own interest, in such a way as to make everyone better off.”
For example, no one has to tell the farmer what crops he should grow in a particular year. Rather, he may see that wheat is selling for a very high price. Wanting to maximize his profits, he decides to grow wheat. He is seeking his own gain, but in so doing also satisfies people’s high demand for wheat, which is reflected in its high price. Likewise, no one tells the farmer how to grow wheat. For the same reason he wants to sell his wheat at the highest possible price, he will want to grow it at the lowest possible cost. So, he will naturally seek out the most efficient way to grow his wheat. And all this happens spontaneously and without government intervention.
This is an important insight for those of us who desire that our economic system benefits all who participate in it. The free market has its flaws, to be sure, and needs to be complemented with a spiritual and ethical framework to correct these flaws, but the market is far better at promoting the welfare of people than the centralization of economic decisions in the hands of a few. This is one of the perspectives on economic life that the Acton Institute seeks to promote, and I thank you for your support that allows us to do it.
Fr. Robert A. Sirico