16.2 Categorizing public policy  (Page 2/13)

Proponents of free-market economics    believe that the market forces of supply and demand, working without any government involvement, are the most effective way for markets to operate. One of the basic principles of free-market economics is that for just about any good that can be privatized, the most efficient means for exchange is the marketplace. A well-functioning market will allow producers of goods to come together with consumers of goods to negotiate a trade. People facilitate trade by creating a currency—a common unit of exchange—so they do not need to carry around everything they may want to trade at all times. As long as there are several providers or sellers of the same good, consumers can negotiate with them to find a price they are willing to pay. As long as there are several buyers for a seller’s goods, providers can negotiate with them to find a price buyers are willing to accept. And, the logic goes, if prices begin to rise too much, other sellers will enter the marketplace, offering lower prices.

A second basic principle of free-market economics is that it is largely unnecessary for the government to protect the value of private goods. Farmers who own land used for growing food have a vested interest in protecting their land to ensure its continued production. Business owners must protect the reputation of their business or no one will buy from them. And, to the degree that producers need to ensure the quality of their product or industry, they can accomplish that by creating a group or association that operates outside government control. In short, industries have an interest in self-regulating to protect their own value. According to free-market economics, as long as everything we could ever want or need is a private good, and so long as every member of society has some ability to provide for themselves and their families, public policy regulating the exchange of goods and services is really unnecessary.

Some people in the United States argue that the self-monitoring and self-regulating incentives provided by the existence of private goods mean that sound public policy requires very little government action. Known as libertarians    , these individuals believe government almost always operates less efficiently than the private sector (the segment of the economy run for profit and not under government control), and that government actions should therefore be kept to a minimum.

Even as many in the United States recognize the benefits provided by private goods, we have increasingly come to recognize problems with the idea that all social problems can be solved by exclusively private ownership. First, not all goods can be classified as strictly private. Can you really consider the air you breathe to be private? Air is a difficult good to privatize because it is not excludable—everyone can get access to it at all times—and no matter how much of it you breathe, there is still plenty to go around. Geographic regions like forests have environmental, social, recreational, and aesthetic value that cannot easily be reserved for private ownership. Resources like migrating birds or schools of fish may have value if hunted or fished, but they cannot be owned due to their migratory nature. Finally, national security provided by the armed forces protects all citizens and cannot reasonably be reserved for only a few.