The Foundations of Free Enterprise
by Allen, Armstrong, and Wolken
As Americans we enjoy many freedoms. Freedom of speech, freedom of religion, and freedom of the press are among the first that come to mind. Less well known, but of equal importance, is the idea of “economic freedom.” In a free enterprise system we are free to voluntarily cooperate with each other while pursuing our own separate interests.
Economic freedom is important to us both as businessmen and as consumers. In a pure free enterprise system the business owners enjoy each of the following privileges:
1. The right to start or discontinue businesses.
2. The right to purchase any resource they can pay for.
3. The right to use any technology.
4. The right to produce any product and to offer it for sale at any price.
5. The right to invest in any way.
We should keep in mind that these rights do not include guaranteed success. A businessman has the right to produce buggy whips and the right to charge any price he wishes. But there is no guarantee anyone will buy from him because consumers can also exercise their economic freedoms.
Freedom of individual choice is equally important. Each individual has the right to make the following decisions:
1. The right to buy any good or service available provided he can pay for it.
2. The right to offer his services for any type of job.
3. The right to quit any job.
4. The right to use his own resources in whatever way he wishes consistent with the rights of others.
These rights, too, do not include any guarantees. We have the right to offer our services as a carpenter, but no one is forced to hire us.
Although we have discussed economic freedoms of businesses and individuals separately, they are closely related to each other. When businesses are privately owned, interference with the freedom of business (enterprise) is actually interference with the freedom of individuals, the owners. We then see an important distinction between the terms private enterprise and free enterprise. A private enterprise system is not necessarily free. But a free enterprise system is both private and free.
Of course, we must recognize that total economic freedom can never be realized. The use of one’s rights must be constrained by the rights of others. As we will see later, the economic freedom of businesses is constrained by competition from other producers.
Economic freedom is an important part of the free enterprise system, because it allows us to pursue our own self-interests. This encourages us to be productive. And, as we said earlier, productivity leads to a larger pie, which allows us to have higher standards of living.