The Benefits of Trade
A nation’s industries, commerce, standard of living, and all other aspects of its economy are closely intertwined with the economies of foreign nations, through avenues such as goods, capital, technology and enterprise. Rising global prosperity further encourages nations to commit to harnessing relations with others in ‘a world shrinking and becoming a single place.
‘(Marx) Not a new conception, the phenomena ‘Globalisation’, poses real opportunities and more surreal threats. Many contemporary authors in the field of science, politics and economics alike have resounded differing assumptions that support and contradict this newly formed sense of unity.
Milton Friedman, an established economist, proclaims the ideology of a free market where ‘no external force, no coercion, no violation of freedom is necessary to produce cooperation among individuals all of whom will benefit’ (Friedman, p 2) In this essay, siding with the view of Friedman, I will define the key concepts of the free market and macroeconomic growth via ‘the invisible hand’, before critically evaluating one of its most sacred assumptions, the hypothesis that an ‘invisible hand’ will rid the threats of current existence and allow ‘all parties to benefit.
‘ (Friedman, p 7) Through evaluating the scope of the free market I will firstly assess the
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ince the inception of classical economics over 200 years ago, one of the most profound assumptions made by the father of economics, Adam Smith, has been ‘that an invisible hand determines market prices and that market prices follow a random walk. ‘ (Friedman p8) The ‘invisible hand’ has been used in many forms and differing contexts but most predominantly refers to the theorem that ‘by pursuing his own interests he frequently promotes that of the society more effectually than when he really intends to promote it.
‘ (West, 2000) The ‘free market’ is a term that summarises ‘an array of exchanges that take place in society. ‘ (Rothbard 2002). Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. ‘Free markets depend on no one being able to manipulate or corner the market; if one person or a small group of people are so powerful that they can control the market, then the free market ceases to exist .