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Free markets don’t always mean low prices

Posted by Chance on June 23, 2006

I like what Firey says about free markets.

…more competitive markets do not guarantee low prices — they only guarantee that prices more accurately reflect costs.

I think that many, including myself, assume the opposite. I think that is why so many people, including Republicans, are losing faith in the free market when they see the sky-rocketing price of gas. Sometimes things actually cost a lot. Sure, gas prices can be regulated. A regulated economy can actually have lower prices than a free-market economy. However, as costs of production go up, and these prices stay fixed, producing that product is no longer a desirable option. That is why when prices are regulated, for gas, groceries, anything, shortages occur.

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2 Responses to “Free markets don’t always mean low prices”

  1. The Prophet said

    Good Comment… I take your side, Chance. What I hate (and this doesn’t really pertain to gas) is when one company has a monopoly on a product.

  2. Chance said

    Yeah, I know what you mean. Monopolies defeat all the advantages of a free market. Here is the question though…are free markets naturally inclined to prevent or ultimately defeat monopolies? Some would say yes, others would say gov’t must step in at that point. I’m not really sure.

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