The underlying principal of free-market economics is that individual actors will, in the aggregate, make optimal choices. Why should we believe this to be true?
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The underlying principal of free-market economics is that individual actors will, in the aggregate, make optimal choices. Why should we believe this to be true?
Short answer: http://en.wikipedia.org/wiki/First_fundamental_theorem_of_welfare_economics
Long answer: Because doing unoptimal things is generally bad in the long run, and people aren’t stupid. Adam Smith talks about it a lot more in The Wealth of Nations, but the general idea is that if you hit the axioms of the free market, anything else doesn’t really make sense. Now, there are a number of counterarguments, such as basically nothing fulfilling the axioms, and contesting if the mathematically guaranteed result (Pareto efficiency) is as efficient as you can get. However, the argument is that not only are the results of the free market good, but the framework of freedom of interaction and commerce is a good one to have.