After watching the first part of the documentary “ The power of the market, I can say I now have a much better understanding of what free markets are, the way these work, and more especially how this ideology developed into the economic hub of the world leading potency, China. A free market economy is an economy in which the allocation for resources is determined only by their supply and the demand for them, not by some designated authority. Hong Kong is an example to this, as they implemented a free market structure and it worked out quiet well.
Prices set the foundation to any market, and if a free market economy is to be established, prices must be free to reach their own levels. In a free market, pricing should be based on the preferences of consumers and sellers, putting aside any government rules, regulations and policies ...view middle of the document...
This documentary also served to help understand the constant interaction and interdependence between people regarding trade. As Milton Friedman explained, one simple object like a pencil is made of many different components that come from very distant countries. The interaction among businesspeople is what allows markets to produce sufficient goods as to fulfill peoples’ needs. I personally related this premise to one of the main principles of economics “trade can make everyone better off”, as the combination of resources from all these different countries, not to mention the time and effort it took to produce each part of a single item, comes down to a two dollar pencil that we definitely need in our everyday lives.
No one is able to produce pencil on his/her own. This proves why free markets are so important, as according to Friedman, these are the best way to guarantee the efficiency of production. In a free market, supply will adjust until it meets demand and reaches the right level of effectiveness.
With this documentary, Friedman seeks to transmit the benefits of having a free market and how the economy would flow if this structure were to be implemented. He refers to how having a free market where everyone has the choice of succeeding in what they do best, if they succeed get all the credit or if they fail there is no one to impair them. Working only for their own interest and future success is a fair incentive for people to give their very best in what they do. As there are no mandatory public payments, people are able set low prices and compete in the global market having some sort of advantage over other countries. This might just be the type of economy we all desire, and I personally believe that a free market would be beneficial for all members of society. Some people might disagree, but Hong Kong success clearly says otherwise.