Why Free Markets Are the Best System Of Allocation

Fantastic column from Dr. Horwitz.

“Who Gets What” Is Only Half the Problem – The Future of Freedom Foundation: But whatever the advantages and disadvantages of non-price allocation systems, they all have one enormous defect: the way goods are allocated might affect their production. These schemes treat goods like manna from heaven; but the production of goods is not independent of how they are allocated. In other words, we need a system for determining which demands will get satisfied that pays attention to supply!

Notice that when goods are allocated by price, changes in demand are translated into matching movements in supply.

Allocation by price connects demand and supply in a way that no other allocation system can. Despite the worries that allocating by price and “willingness to pay” is unfair to the poor, that very same process ensures that the supply of goods is constantly growing and becoming cheaper over time. That can be said of no other system. In the end, allocation by market prices is what has made possible the enormous increases in the standard of living of the poor in the West and, increasingly, other parts of the world.