HOW THE FREE MARKET EMBODIES THE GOLDEN RULE
In economics, “The Golden Rule” can refer to a different concept having to do with government debt, but that’s not what we’re talking about in this article. We mean the actual Golden Rule – the one we’ve all had drilled into us since we were little. Something along the lines of “do to others as you would have them do to you.”
What does this have to do with the free market, you ask? First, we recommend reading our post The Free Market Economy: What is it Really? to get an idea of what the free market is in a nutshell.
Now that we’re on the same page, let’s break it down.
First, why is the Golden Rule important for life? For one thing, it helps ensure that people can get along, even if they have differences. If people in a society are treating each other with mutual respect, that society will be generally better off. Certainly, no society operates this way entirely, and we end up with things like crime and people who cut others off in traffic. But at least in theory, most of us know that by treating others as we would like to be treated, the better everyone’s life will be. Even if you don’t like someone, by treating them the way you’d like to be treated, you are more likely to get along peacefully with that person. It’s a concept most of us understand almost intuitively, and most of us practice it and benefit from it every day. Properly applied, it allows for peaceful societal interaction regardless of location, belief, appearance, or otherwise.
Here’s the thing: the free market is just the Golden Rule applied to business. Think about it: I offer you a product (value). If you also consider my product to be valuable, you give me value (usually money) in return. But say, in the course of this transaction, I don’t treat you in a way you want to be treated. Maybe the product I deliver is not worth what I charged you, or maybe I gave you poor customer service. Maybe you feel that I’ve taken advantage of you –that I have not followed the Golden Rule. In a properly functioning free market (Link to Common Free Market Myths) you are free to take your business elsewhere, to someone who will treat you well. I as the business owner must change my practices, or forgo further transactions.
Let’s look at it in another way. Perhaps it will help to tweak the phrasing of the Golden Rule a bit. Instead of “do to others as you would have them do to you,” let’s say something like “provide for others what you would like provided for you.”
Here’s what I mean by that. Let’s say again that I’m a business owner and you are my customer. Again, I need to offer you value. How do I determine what that is? My best bet is to provide you with what I would like provided to me, were I in your shoes. Maybe I look at you and think that you would really enjoy an awesome cup of coffee on your way to work. I need to make money, so I decide that I’m going to try to sell you coffee. Will I be successful by trying to sell you a cold cup of burnt coffee, which I hand you without a word, on whatever morning I decide to be open? Of course not. One such experience and you would never buy coffee from me again, and if I kept whatever hours I liked, you’d soon stop coming by on your way to work because you can’t rely on me to be there.
But maybe instead, I think to myself, “I like really hot, high-quality coffee. If I were driving to work in the cold every morning, I would like to be able to pick up my coffee at the same time every day. I’d like it to be reasonably priced – more than I would pay to make my own coffee at home, because it tastes better and is more convenient, but not as much as I might pay for a glass of wine.” So I make sure that my coffee is hot and delicious, and I charge you enough to make a profit (I’m offering you my valuable time as well, after all). When you come to pick it up, I smile and wish you a good morning. Maybe I even learn your name, because I know that I like it when people remember my name.
I’ve done for you what I would like done for me, were I in your shoes. As a result, you will probably leave satisfied, and maybe even tell your friends. Therein lies my success – in following the Golden Rule.
At its core, the free market runs on the concept of mutual benefit and trying to please the other person. Each person walks away happy. That sure sounds like the Golden Rule to me, and like a system I want to live by!