The market is a generic term used to understand how an economy works. Though the word is sometimes used to describe a particular place where people do business, in more general terms, it is just the composite of the transactions of many interacting people, often over a wide geographic area. Everything that happens in markets is the result of individual people making decisions based on their own knowledge, assumptions, and desires. It is truly amazing that, without a central planning authority, people in market economies get fed, clothed, and housed in a very efficient and cost-effective manner, much more so than in societies or sectors of societies where central planning is attempted. Even in the biggest cities, stores will generally have a supply of the items desired by the people. Most of the time, things work fairly smoothly and society progresses.

There is, of course, the problem of poverty, but before the advent of widespread economic freedom and market-based economies, grinding poverty, poor health, and short lives were the norm for common folks everywhere. The rise of the standard of living of the poor is one of the incredible success stories of the system of free enterprise. There is the problem of crime, but stories of bad behavior date back to the earliest societies. People are generally more secure in societies which have strong protections of property rights and other civil rights than in those which don’t. There is the problem of pollution, but that is not the result of free markets. It is the result of human society. The levels of pollution in totalitarian societies are no better, and often far worse, than those of free societies.

Whenever anything bad happens, cheerleaders for big government automatically shout “Market Failure.” The implication is that the markets have gone wrong because of human weakness, greed, or ignorance, and wise, benevolent, selfless politicians and bureaucrats are needed to set things straight again. The term market failure, however, means only that the results were different than what some people wanted or expected. To say that all undesirable results are proof of market failure is like calling Hurricane Katrina proof of weather failure or the eruption of the volcano in Iceland proof of geological failure. They are simply events which arise from specific, understandable causes.

It seems like the BP oil disaster is certainly a market failure from which government must save us, but that is only true in the sense that the Chernobyl Nuclear meltdown in the Soviet Union, Three Mile Island in America, the space shuttle Discovery explosion, and the breach of the New Orleans levies were government failures. The government has no better record regarding disasters than any market. Each disaster is the result of specific causes. Disasters are learning opportunities for all involved, and can result in improvements in processes as long as those responsible are held fully accountable. With all of the many thousands of oil wells, nuclear facilities, factories, and other sources of potential disaster, the true wonder is that we have experienced as few catastrophes as we have. Those that are not disasters are the sources of progress and prosperity for everyone in society.

There is a difference between markets and weather, economies and volcanoes. Markets are made of people, who can make mistakes and change their minds. Economies ebb and flow based on the activities of the participants. But government officials are also people who make mistakes, who’s actions are often based on whims rather than principle and the rule of law. The problem with government officials is that they can force their errors in judgment onto masses of citizens with no negative consequences for themselves, and in fact, significant benefit to themselves. Governments can use monetary and fiscal policies to expand credit, create new money, and cause tremendous economic booms. The ultimate results of artificial, government-induced booms, however, are the inevitable economic meltdowns which follow. Booms and busts are government failures, the results of particular actions and policies.

The market is merely a way to understand how the world works. The laws of economics which describe it cannot fail any more than the law of gravity can fail. Only participants in the market can fail. When they reap the reward for engaging in voluntary transactions which benefit all cooperating parties, and the punishment for using force or coercion, or imposing their mistakes and costs on others, society has the best opportunity to progress to higher levels, to everyone’s benefit. That sounds like success to me.