The Free Market and the Lawn Mower



The free market is a great engine and occassionally some students think that's not such a great thing. They point out some of the negatives of the free market such as pollution, unemployment, exploited child labor in less developed countries or the more recent mortgage meltdown. When I hear these stories, I tell them of the lawnmower analogy. So here that is.

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The Lawnmower Analogy

Let's say that we invent the most kick ass small engine ever. It's so efficient and powerful that it can run and run on very little fuel and has tons of horsepower. We decide toput this engine on our self propelled lawnmower and after turning a few bolts it works great.

So Bing badda boom, we mow the front lawn in 5 minutes rather than the typical hour it usually takes. We decide to go inside adn get a glass of iced tea but for get that the mower is still running. When we were not watching it, the mower rolled next door and cut a patch in the neighbor's yard and rather efficiently mowed down their prized rose bushes. But it didnt' stop there, it continued to the next neighbor's yard and mowed a stripe there as well as cut down their doghouse (hopefully without Sparky out of it).

The point is this. The free market is a great engine. But you'd better keep your eye on it. Ask the banks that bough sub-prime derivatives and tell tell you. People respond to incentives, but sometimes the engine of self-interest can pack an immoral punch. That's why engineers put throttles on engines and it's why governments sometimes regulate the free market.
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Here is a recent article on the father of the free market (and yes, my hero) Adam Smith. His theories are truly timeless.

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