Question

write an essay about why the free market is impossible?

Answer 1

Free market is a market driven by market forces and are not intervened by the government. Further, free market represents free & fair competition with auto correction and stabilization process. But, in practical world, free market existence is impossible. It can be understood by different arguments.

The first argument is that a free market without government intervention is being controlled by the bigger enterprises, who start implementing anti-trust policies and wield market power to drive out smaller players out of the market. It negatively affects consumers' interests as well. So, it does not remain to be a free market. To maintain the free & fair competition, the government has to intervene with regulatory laws such as Sherman Act and Clayton Act.

The second argument is that consumers behave differently when recession happens ans they save more than they spend. Further, there is a sticky wage and price in the economy. It also does not let firms to increase the supply and auto stabilization does not happen. It further makes the government to intervene and make spending or reduce the taxation while applying other stimulating packages to stimulate the aggregate demand. It will help the economy to recover from the recession and grow again. So, free market lack sustainability on its own.

The third argument is that when economic crisis happens, then firms start collapsing and no any firms come ahead to help. even the investors of these firms run away to other markets. At that time of crisis, it is the government policy intervention that only helps along with monetary policy. So, free market cannot exist longer on its own. Hence, its existence is impossible.

The recent example of the 2008 financial crises in USA, also force the US government to intervene strongly to resurrect the economy and help it revive.