An Exploration of the Market
“Does the market work?” (Bylund, 1) is a question that many scholars have posed over recent years. To better understand this question, and to have even a hope of answering it, one must first understand what the market is. On a grand scale, the economy and the market are inseparable ideas (Bylund, 2). The market, as it is often discussed, refers to the free exchange of goods or services for a payment of goods or services of equal or greater value. There is no regulation on how these exchanges are performed, or prescriptions of value to each individual good or service, but these decisions must be made by individual producers and consumers to come to an agreement (Bylund, 3). The economy has a “mind of its own”, and creates its own laws and patters that cannot be managed by any individual or governing entity, but can be studied to find greater success (Bylund, 15).
This is not to say that the market is entirely free, as such an idea cannot exist in the world, but it is managed by each individual that participates in it. As it is an organization through which producers can interact with consumers for the mutual benefit of each, the economy can be considered as an entity that exists to use means to attain ends (Bylund, 15). While there is no clear answer to the question “does the market work”, I believe that the market works for the society we have created around it. In modern America, a heavily regulated or restricted market would not work to satisfy the needs of either the producer or the consumer. It would instead frustrate those interested in buying or selling goods or services, and would bring capitalism and entrepreneurship to a grinding halt. Imagine you created a new product, and considered the cost of materials, production, distribution, advertising, and labor needed to create and sell this product. After including a certain amount for profit, you would have calculated the cost required to sell this product to a consumer. In today’s market, you can either succeed by calculating a cost that satisfies a consumer’s needs in a budget-friendly manner, or fail by out-pricing yourself from competition. In a more regulated market, however, you may calculate your price needed to profit, only to be told that such goods can only be sold at a certain cost, decided by the governing body. To succeed in this market would mean cutting costs throughout the production process, either by lowering the quality of materials, the craftsmanship in the production, or the amount you can advertise. These choices are not made for a producer by the government or a regulatory board, instead they are made by the consumer.
“The economy is a decentralized and distributed system where all people- farmers and city folk alike- make their own plans and decisions. They do not simply carry out orders from some central command.” (Bylund, 17)
The Relationship Between the Market and Entrepreneurship
If all choices were made by the government, that would mean that prices, production models, and distribution were all regulated by the government. This system would eliminate the entrepreneurial spirit of thousands of small-business owners and craftspeople.
An objective benefit of this imagined market, however, would be the freedom from uncertainty that entrepreneurs must take on. In today's market, entrepreneurs purchase materials, create prototypes and production methods, and distribute goods without knowing whether or not a product will be well-received at the cost required to create profit.
“This task of bearing the uncertainty of production is what we refer to as entrepreneurship; entrepreneurs choose the type of production that they judge has the greatest chance to meet the approval of consumers at the time it is finalized, and they therefore reap the reward if successful[...] and take full responsibility if it fails[...]” (Bylund, 6)
That is to say, in today’s market, the uncertainty of profitability drives entrepreneurs and producers to create a product, and production methods, that is affordable enough to be desirable to consumers, but expensive enough to still produce profits. If this uncertainty was taken away through a governing agency, entrepreneurs would have no motivation to produce high-quality goods with a low-cost model.
The Market and Priorities
The market (and, on a larger scale, the economy) is a constant series of choices that both the producer and the consumer must make.
“Every choice we make and every action we take means that we forego what we did not choose.” (Bylund, 16)
This means that you must prioritize your resources and needs to allocate funds or commodities to be exchanged for goods or services that will best benefit you. These may be long-term or short-term investments, and could be as simple as making a choice between buying an apple or a banana at the supermarket. I think this is an interesting concept, because we often think about “saving money” or setting funds aside for a future purchase, but we do not often consider the purchases we miss out on in the process. If one wants to buy a car, for example, they must often forego smaller purchases such as new clothes, more expensive meals, going to the movie, etc. in order to save their money. Each time they decide not to purchase an optional good or service, they are choosing to put money towards their future goal of buying a car.
The Economy
This discussion of the market as an entity would be incomplete without an exploration of the economy as a whole. While it is impossible to dive deep into the intricacies of the economy at any time, because it is such a fluid system, an overview will suffice for this analysis. Economists devote their lives to studying how the economy directly affects the individuals that exist within it, but they do not study the people themselves (Bylund, 22).
“It may appear strange that economics does not deal with why people value some things but not others. But it does not. People’s dreams, fantasies, and imaginations only have economic relevance if they are acted upon.” (Bylund, 22)
Bylund states that economists don’t study what people want, but instead they study what they act upon. As discussed above, each transaction or exchange represents a series of choices the consumer has made to save their money until they find a product that is worth their money. This is not because they have not wanted other products or services, but instead because they have not acted upon that desire until they find a product that they value enough to part with their money for. It is impossible to study this phenomenon as a snapshot of the economy though, at any point thousands of individuals are involved with even more exchanges.
“[...] to understand everything we see around us, including everything that we take for granted, we must recognize that the economy is not a state but a process.” (Bylund, 42)
To look at one moment of time in the economy would be foolish, but to realize that each transaction is made up of hundreds of previous decisions made by the consumer is wise. On the production side of the coin, the situation is very similar. In Bylund’s writing, he references the example of a candy-maker producing goods. Their prices reflect not only the labor and skill that they put into their products, but also the labor and skills that go into producing each component of the candy. The sugar must be grown and harvested before being transported, the iron for the equipment must be mined and processed, and the electricity for the machinery to run must be created and supplied to the store (Bylund, 43). At every step in this process, more individuals are involved, and their labor adds to the price.
Conclusion!
In conclusion, the question “does the market work?” may seem very simple to answer at first, but the more you look into the intricacies of the market and the economy, the more you realize it is a deeply complicated process.
I agree that while entrepreneurs are dealing with the market they have to deal with the uncertainty of the outcomes of their decisions. "...Entrepreneurs purchase materials, create prototypes and production methods, and distribute goods without knowing whether or not a product will be well-received at the cost required to create profit." Entrepreneurs face uncertainties while dealing with anything that requires them to create something that consumers will want to buy. Entrepreneurs have to deal with competitors looking to buy the same materials, buying materials low so as not to lose money if the production does not go as planned and can not be sold at the intended price or sold at all. Entrepreneurs do have to plan ahead of the progress of their productions and observe the trends that are happening because of what consumers deem important to them and what they want to buy and use in their daily lives. The market is always changing and adapting to the forever changing environment and needs that the consumers and entrepreneurs create in the process of looking for and developing a better life for themselves and others. A restricted market would limit the process of evolving that the market does without the restriction of the government and freely changing and evolving for the people’s wants and needs. Entrepreneurs are always focusing on the future and changes that might happen in the future to interrupt the flow of the industry and cause their plans of production to fail and cause their company to lose money and time on what they were working on but a change caused their product to not be needed or wanted by consumers. Entrepreneurs must always think ahead and find ways to cut their losses should the market change and the product fail to earn back the money that was spent on creating and the time used to make the product. Entrepreneurs are gambling on their products and hoping that the market will still want their products by the time they are done being produced in the factories and labs. They have to hope that they do not lose money on the advertisements for their products and the market change, and their product not be wanted or turn a profit after it is launched into the market.
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