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The free market has its own way of weeding out bad businesses. Should government also...

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koolkid4life | Student, Grade 11 | (Level 1) Honors

Posted March 25, 2013 at 7:15 AM via web

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The free market has its own way of weeding out bad businesses. Should government also have a role in that process? Explain.

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted March 25, 2013 at 1:58 PM (Answer #1)

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While it is good for the government to have a role in deciding what activities are legal, and weeding out businesses that engage in illegal activities, the government should have no other role in weeding out bad businesses.

When the free market weeds out bad businesses, it does so through the mechanisms of supply and demand.  Businesses get weeded out because they do not produce something that people want.  They get weeded out because they do not produce goods at a low enough price.  In other words, they get weeded out for not being good enough.

There is no role for the government in this process.  The government has no reason to be involved in deciding which goods people want and do not want.  It has no reason to be involved in deciding what price is low enough.  Both of these are things that consumers have to decide for themselves.  Therefore, government should not play any role in deciding which businesses live or die (so long as the businesses are legal).

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