• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

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

Extracts from this document...


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.


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.


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.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. Discuss the view that the free market economy encourages negative externalities and thus the ...

    Thus, negative externalities are detrimental to the efficiency of a market economy no matter regardless of the benchmark for efficiency used. Efficiency, which ensures that society's scarce resources are put to the best uses, is the argument for the correction of negative externalities.

  2. Biography of Adam Smith.

    The classical political economy of Adam Smith was a much broader, more humane subject than the economics that is taught in universities today.... For at least a century it has been virtually taboo to talk about economic power in the capitalist context; that was a communist (Marxist)

  1. This report will establish the opportunities and threats presented to Sony by the EU ...

    Some countries for example Portugal may not be able to afford Sony's standardised TV because they have very low spending power. So this automatically excludes them in Sony's pan-Europe strategy because the Portuguese needs and culture have been ignored. All this would lead is that they will buy from Sony's

  2. Explain how market failures can occur

    Income is the flow of money received in a year through wages, rent, interest etc. Wealth is the stock of goods and physical assets owned by the population like, houses and land. The fact that those with more buying power have the most influence on what is produced (a.k.a.

  1. Is residential property in the UK a good investment?

    The main influence on price is therefore demand. Demand could rise for a number of demographic and social factors, but a big player is population rise; with this comes an increase in demand for housing thus generating an increase in the prices for housing.

  2. It was suggested by Adam Smith in 1776 that individuals led by self interest, ...

    government intervenes to ensure the well being of our society rather entrust us to possible Market Failure and see us purchasing two for the price of one hip replacements where only in the small print do you find reference to the fact that it is two right hips you are

  1. Are Democratic ideals supported by free markets or undermined by them?

    The third way is known as a constitutional democracy. This is usually a representative democracy where all the citizens enjoy basic rights such as freedom of speech within the framework of a written constitution. What all these different systems have in common is that in each case the citizen has a certain amount of freedom.

  2. Australian exchange rate.

    The level of capital inflow will be affected by the level of Australian interest rates relative to overseas interest rates as well as the level of confidence in the Australian economy. If Australia has relatively higher interest rates and stronger confidence, then this will encourage capital inflow and increase demand for the AUD.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work