Friday, August 12, 2005

Checks & Balances

There are more checks and balances in a free market than in government.

The U.S. government is set up with an intricate system of manmade checks and balances. Government is composed of three branches: executive, legislative and judicial. Each, in theory, should act to limit the scope of the other branches. Although each branch has the power to act as a check on the others, we still see a gradual increase in power and erosion of rights. The capability is there, but strong incentives for each branch to limit the power of the other branches do not exist.

Compare this to the free market. The market is composed of billions of transactions, all created by people with competing interests. There is no explicit list of checks and balances. There is no need for any. The seller wants to obtain the highest price for his goods; the buyer wants to pay the lowest. The rules for the transaction are simple: both sides have to come to an agreement for a transaction to take place. Their agreement assures that the trade is fair.

Forced takings do not have the same outcome. They do not create 'balance' because one person's interest is sacrificed in the interest of the other. Instead of the mutual benefit that takes place in a free market transaction, we observe the benefit of the few at the expense of many when government asserts its role in the marketplace.

Government doesn't need to assure 'fair trade' except to punish fraud and other violations of property rights. Government's attempts to provide 'balance' only result in imbalance. Let the effective checks and balances in the free market do their job.

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