Free Markets Work: Where There Is Demand, There Will Be Supply

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Written By:
Rob Port

Mar 8, 2012
11:05am

Business Insider has an interesting photo essay about the Bakken oil boom. You can see all the pictures here, but the pictures of these flyers advertising services for oil workers:

What you’re seeing are advertisements, posted by entrepreneurs, offering food and laundry services to oil workers. It’s the free market at work. There is demand and need, and can-do, enterprising individuals are rising up to supply it at prices those in need of the services can afford.

There’s this assumption in our society that supply and demand doesn’t work. That sometimes the government needs to step in to do things the free market won’t do. Whether it’s subsidies for “green” energy or subsidies for rural broadband, we’re told the government has to spend our tax dollars doing things the private sector won’t or can’t do.

But here’s the thing: If there’s legitimate demand for something, someone in the free market will figure out a way to supply that demand. When the government does things, they’re usually either supplying a legitimate demand and thus crowding the private sector out of the market, or they’re supplying demand that doesn’t actually exist, in which case they’re squandering our tax dollars.

Look at rural broadband. Yesterday I wrote about Verizon offering a broadband internet product to rural communities over their cell phone network. This despite the federal government spending billions upon billions of our tax dollars subsidizing the expansion of broadband into rural areas. How much quicker would we see private-sector solutions to the demand for rural broadband if the government weren’t distorting the market for subsidies?

This is an example of the government crowding out the private sector.

Look also at “green” energy. We’ve spent decades and billions subsidizing energy sources like ethanol, wind power and and solar power and yet if the subsidies and other government protections for those industries were ever ended (in the case of ethanol some subsidies have ended, and wind power subsidies are on the chopping block) they would collapse. Because there is little demand for expensive and/or unreliable forms of energy.

These are examples of the government supplying things for which there is little or no demand.

Rather than the government what the market should (or should not) be supplied with, maybe we should just let free markets work?