What is Free Market, What Does It Mean?June 26, 2021
Because the division of labor increases productivity and makes it possible for everyone to do some kind of work (as it does not require learning a particular craft), Smith argues, this can lead to universal prosperity in a well-organized society.
In fact, he says, in perfectly free conditions of the market it can lead to a state of perfect equality, which leaves everyone free to pursue their own interests in their own way as long as it does not conflict with the law. And by the term equality here, Smith does not mean equality of opportunity, but equality of conditions. In other words, its aim is the creation of a society not divided by competitiveness, but united by bargaining on the basis of mutual interests. Therefore, what Smith is trying to convey is not that people are free simply because they deserve it. His view is that society as a whole benefits from individuals pursuing their own interests.
The “invisible hand” of the market, through the laws of supply and demand, regulates the quantity of goods and prices them far more favorably than any government could. Simply put, Smith’s view is that the pursuit of self-interest is the surest way to achieve it, as it does not contradict an egalitarian society. In such a society, the state may limit itself to performing only a few necessary functions such as defence, criminal justice and education, and taxes and fees may be reduced accordingly. And bargaining can develop within national borders as well as transcend them, enabling international trade—a phenomenon that has just spread around the world in Smith’s era.
Smith recognized that there were some problems with the notion of the free market, especially with the increasingly common bargaining over working hours. He also knows that while the division of labor provides huge economic benefits, it is very tedious for workers to do the same job over and over, and therefore he suggested that the government restrict the scope of use of the production line. Despite all this, the doctrine of free and unregulated trade, which he advocated when “The Wealth of Nations” was first published, was seen as a revolution not only because it opposes the established order of commercial, agricultural privileges and monopolies, but also because of the thesis that a nation’s prosperity is based on labor power, not gold reserves, and which was totally against the economic thought in Europe at that time.
Smith’s reputation as a revolutionary was strengthened during the long debate about the structure of society that emerged after the French Revolution of 1789, and Victorian historian H.T. It caused Buckle to describe “The Wealth of Nations” as “probably the most important book ever written”.
Prepared by: Sociologist Ömer YILDIRIM
Source: Omer YILDIRIM’s Personal Lecture Notes. Atatürk University Sociology Department 1st Year “Introduction to Philosophy” and 2nd, 3rd, 4th Grade “History of Philosophy” Lecture Notes (Ömer YILDIRIM); Open Education Philosophy Textbook