Defining Free Markets
A market-based economy is a system that harnesses scarce resources through a system of well-defined and well-protected property rights. It is characterized by private ownership of the means of production, instead of public ownership of these means. But what are “means of production?”
Means of production are anything used in production: farms, factories, machines, computers, even your blender at home. Mining crude oil provides a helpful illustration. There are numerous ways the raw oil we mine can be processed, resulting in different products, such as gasoline, fertilizers, plastics, and cosmetics.
The process of mining and processing the oil into these and many other products involves the means of production. A competitive, market-based economy ensures that suppliers are guided by prices, profits and losses, and property rights to make the best decisions over the means of production. Ultimately, this is an issue ofstewardship.
According to theologian Walter Kaiser,
Private property is both a gift and a certain type of power God has entrusted to humanity as stewards. It was God’s intention that mortals should be equipped with this gift and power and that under God they should exercise dominion over the earth. An attack on the rights to private property in recent centuries has denied God’s law and design by weakening those same property rights.
The benefit of a system predicated on private property is that it doesn’t rely on one or a few smart people to try and figure it all out. Think about how limited our power of stewardship would be if we had to rely on only one person to figure everything out.
Instead, God created us uniquely with gifts that allow us to serve one another. Free markets and well-protected private property rights help us live out the stewardship to which God has called us.
Service and Competition Within Free Markets
Returning to our example of mining oil, how do we know how to best use crude oil on a given day, since no one person has all the knowledge to determine this? The answer lies in figuring out how to best serve others. Through trade, we can ascertain the most highly valued use of the crude oil, and thus best serve the needs of consumers.
Economist Jeff Tucker explains this aspect of service embedded within market-based economics:
When people think of capitalism, competition is perhaps the first idea that comes to mind. But the idea is widely misunderstood. It doesn’t mean that there must be several suppliers of every good or service, or that there must be a set number of producers…. It means only that there should be no legal (coercive) limits on the ways in which we are permitted to serve each other. And there really are infinite numbers of ways in which this can take place.
There are indeed infinite ways we can serve each other. Tucker goes on to say:
In sports, competition has a goal: to win. Competition has a goal in the market economy, too: service to the consumer through ever increasing degrees of excellence. This excellence can come from providing better and cheaper products or services through providing new innovations that meet people’s needs better than existing products or services. It doesn’t mean “killing” the competition; it means striving to do a better job than anyone else.
Christians understand that we are called to both serve others and exercise excellence and integrity in all we undertake. A market-based economy best organizes human behavior around these biblical callings, and allows us to further the path to an opportunity society.