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Free Markets & Rights:

John Locke
The right to life, liberty and property

Criticism to Lockean Theory

Focus on 4 Issues:
Assumption that individuals have the natural
Conflict between negative and positive rights
Conflict between Lockean theory and principles of
Individualistic assumption of Locke and their
conflict with demands of caring

John Locke

Human beings have certain natural rights that only free

market system can serve

These rights are:

Right of freedom and
Rights of private property

Free markets are supposed to preserve the right to

freedom so far as they enable each individual to voluntarily
exchange goods free from any coercive power of Govt.

They are suppose to preserve private property in so far as

each individual is free to decide will be done with what he
or she owns without any interference of Govt.

John Locke
As per Locke the law of nature teaches that
each has a right to enjoy his liberty without any
interference from the Govt.
People agree to form the Govt. to protect their
right to freedom and property.

Adam Smith
Unregulated markets and private property will
produce greater benefits than any amount of
regulation could
In a system with free markets and private property,
buyers will seek to purchase what they want at
lowest prices
So they will pay business houses to produce and sell
what consumers' want that too at lowest prices
This will maximize the economic utility of members
of the society

Adam Smith
When private individuals are left free to
seek their own interests in free markets,
they will inevitably be led to further the
public welfare by an INVISIBLE HAND
(Market Competition)
Competition will ensure enhancing value of
products and lowering down of prices

Adam Smith
Market competition ensures that pursuit for
self interest in market enhances publics
welfare which Govt.s interference does not

Criticism of Adam Smith

It rests on unrealistic assumptions
It is a false assumption that relevant
costs are paid by manufacturers
It is wrong to believe that
human0beings are motivated by selfinterested desire for profit
Some degree of economic planning is
possible and desirable

Maynard Keynes
In an economy, all available resources are
used and demand always expands to
absorb the supply of commodities made
from them
The sum of demand is from 3 sectors of
economy household, business and
Free markets alone are not the most
efficient means for coordinating the use of
sovietys resources

Social Darwinism
It believes that economic competition
produces human progress
Believes in the survival of the fittest
Whatever happens naturally is
always the best

David Ricardo
Gives the Theory of Absolute Advantage
vs. Comparative Advantage
It talks about a situation where the
production costs of making a
commodity are lower for one country
than for another
Specialization can mutually benefit each
other inspite of not being the cheapest.
This is called Comparative Advantage

Criticism to Ricardo
Today there is easy movement of
capital between companies
It is wrong to believe that countries
production costs are constant
There is influence of international
rule setter

Karl Marx
Believed in the equality of private
property, and was against free
markets and free trade
Sufferings in industry is due to
capitalism and that can be regulated
by setting standards equal for

Mixed Economy
An economy that retains a market
and private property system but
relies heavily on govt. policies to
remedy deficiencies.
Talks about intellectual property