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What are two benefits of the free-market system?

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mplumb1 | Student, Grade 10 | eNotes Newbie

Posted January 19, 2012 at 6:41 AM via web

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What are two benefits of the free-market system?

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readerofbooks | College Teacher | (Level 2) Educator Emeritus

Posted January 19, 2012 at 9:36 AM (Answer #1)

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There will be various opinions on the value of a free-market. In other words, not all people will believe that a free-market system is a great idea. Moreover, in our current big government, the idea of a free-market is on hard times. But if you ask someone who believes in a free-market approach, they will tell you that there are many benefits. Here are two of them.

First, a free-market system regulates itself in a natural way. So, good companies and things that are good for the economy will grow and companies that are run poorly will go bankrupt. Advocates of the free-market approach state that these cycles of ups and downs are a normal part of an economy and that these cycles are healthy. It is a way to create a robust economy. Think about it. When we bailed out our failing banks, we made them bigger and now they are bigger and still weak. We have taken money from competent people and given it to incompetent people.

Second, in light of point one, a free-market approach states that we will not have to deal with governments coming in and artificially creating bubbles and all sorts of other economic problems. For instance, the housing bubble came to pass in part due to artificially low interest rates, which the Federal Reserve set.

As you can imagine, the debate continues.

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