After the PNC created a socialist economy after independence, successive Governments have been attempting to shift to a market economy, which needs to be appreciated by our citizens and politicians. The following was offered by The Federal Reserve Bank in St Louis. “A market economy is an economic system in which individuals own most of the resources – land, labor, and capital – and control their use through voluntary decisions made in the marketplace. It is a system in which the government plays a small role. In this type of economy, two forces — self-interest and competition — play a very important role.
Why do you go to work? Why do you go to school? There may be many reasons, but at their core you probably go to work and school because you are self-interested. To be self-interested simply means that you seek your own personal gain. You go to work because you want to get paid, so you can buy the things you want. You go to school so you can get a better job someday, and earn more money to buy the things you want. In fact, most of the economic activities we see around us is the result of self-interested behavior.
Why does the baker choose to bake? The answer is self-interest. The baker wants to earn enough money to feed his family and buy the things he wants, and the most effective way he has found to do that is to bake bread for you. In fact, his bread has to be good enough and the service friendly enough that you are willing to give up your money freely in exchange for his bread. The baker, while serving his self-interest, has produced a good that is very valuable to you. The miracle of a market system is that self-interest produces behavior that benefits others.
“Is being self-interested greedy? Is it immoral? While the term self-interest has negative connotations, it does not necessarily imply greedy or immoral behaviour. Self-interest just means that you seek your goals. In fact, your self-interest might lead you to study hard for your math test, give money to your favourite charity, or volunteer at a local school.
“Doesn’t self-interest lead to price gouging, corruption and cheating? Sometimes it does, but most often it is held in check by competition. Because other self-interested people are competing in the marketplace, my self-interest is held in check. For example, if I were a baker, the only way I would be able to earn your dollars is to produce bread that is better, cheaper, or more convenient than the bread produced by the other bakers in town. If I were to increase my price too much, you would likely buy bread from my competitors. Thus, competition is the regulator, a check on self-interest, because it restrains my ability to take advantage of my customers.
“Adam Smith described the opposing but complementary forces of self-interest and competition as the “invisible hand”. While producers and consumers are not acting with the intent of serving the needs of others or society, they do. When you work, your goal is to earn money, but, in the process, you provide a valuable good or service that benefits others and society. The amazing part of this process is that there is very little government control. The bread you buy at the store arrived as the result of hundreds of self-interested people cooperating without a government bread agency managing production at each step along the way. In the words of Adam Smith, it’s as if they were being guided by an invisible hand that guided resources to their most valued use.
“The discussion of self-interest and competition usually results in a discussion of the proper role of government regulation. Some see a market economy as largely self-regulating, assuming there are enough firms competing in the market to be a check on self-interest. Others point to examples of fraud where competition has failed to be an adequate check on self-interest – they argue that government must take a more active role regulating economic activity.”