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Can we rely on free exchange between individuals to generate the "common good"?

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Introduction

Can we rely on free exchange between individuals to generate the "common good"? The common good is something that benefits all of society. It results in maximum benefit with creating positive externalities where social benefits are higher than the private benefits and social costs of production. It is no one product but a product giving maximum satisfaction to one individual. Examples of common good vary according to preferences and satisfaction levels of individuals, some people (generally women!) want to feed an addiction for chocolate; some people (generally men!) want to smoke long cuban cigars! In these two circumstances Chocolate and Cigars are to be the common good simply because individuals are getting maximum satisfaction from the consumption of these product. In a free market, individuals and companies are allowed to trade freely without the need of government intervention. Free exchange relies on the exchange between individuals to produce the common good. Free exchange can be relied on in order to generate the common good to an extent. It is the belief that individual actions lead to a social good. Economists have argued that workers and producers, are only interested in helping themselves and their loved ones. ...read more.

Middle

The graph illustrates the case for a merit good. Secondly, markets fail, as they are not efficient, resulting in mass production or underproduction, examples we have an overproduction of water and air but and under production of healthcare and education. Merit goods are normally under produced in a free market scenario. Having insufficient resources devoted to their production, the problem being the lack of information about the benefits of the product will results in insufficient demand being registered for the product in the market. De-merit goods on the other hand will be over produced due to the value judgment produced on them by individuals. These are goods that are worse for the individual consumer than he/she realises. Resulting in too many resources being devoted to production of de-merit goods, leading to market failure i.e. production of cigarettes. Leading to the market being allocatively inefficient but can be blamed on individuals as they value judgement causes markets to produce such goods. A public good, can be seen as an example of a common good, once produced it will benefit society as a whole, hence social good. Public goods can be distinguished by two characteristics- non excludable and non-rivalry- as once produced one cannot be stopped from enjoying the benefits and ones consumption does not diminish the benefits for others. ...read more.

Conclusion

In a free market, free training programmes for the unskilled will not exist. So it all comes to the issue of social justice, in reality it will not exist if market forces are left to its won devices. Free market does in fact lead to efficiency in certain are but for real the common good will not necessarily be provided and guaranteed by the free exchange of individuals. Some degree of government interception is needed to prevent negative externalities from de-merit goods i.e. cigarettes, to promote positive externalities by providing merit goods i.e. health care and education for all irrespective of their ability to pay. And to ensure the provision of public goods such as defence and street lighting. Through taxation governments can also ensure the redistribution of income and improve the mobility of labour, governments can ensure a fair and socially justified society. Overall, free market ought to run through the forces of demand and supply but government intervention but not to the extent of communism, should also exist in ensuring the provision of the common good. It should be taken into account although market failures do occur so do government failure thus a balance between free exchange between individuals and government intervention will only generate the common good and not the reliance solely on free exchange. Samit Patel SESS E101: Introduction to Economics Coursework 1 12/11/2003 13:53 ucl28-ws157.ucl28 ...read more.

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