3.2: Free Markets - Sustainability

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Page ID: 210826

Martin Medeiros
Chabot College

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Think of efficiency as the immune system for an economy. As with people, if an economy’s immune system falters, then it becomes susceptible to decay from external shocks (like hurricanes, terrorist attacks, epidemics, etc.) and internal market forces (aging population, political instability, etc.).

Waste is like snow falling on the roof of a house. If snow, like waste, is not removed from a roof, it could accumulate to the point of collapse. A sign that an economy is under a compromised ceiling due to chronic inefficiency is excessively high unemployment. When there are millions of people out of work for extended periods of time it will not take much of an external shock, like a category 5 hurricane (remember hurricane Katrina?), to cause total devastation to an economy. It is at this point when people look for alternatives and abandon the current economic system.

A cabin in the snow. Description automatically generated

(source: created using AI Image Generator - Create Art, Images & Video | Leonardo AI)

There have been many examples of economic collapse brought about by the crushing effect of waste. The economic collapse of the Soviet Union is just one of the more dramatic and recent examples.

Any economic system needs to be able survive shocks and changes to global economic environment if it is to last any significant length of time. An economy that is effectively utilizing its scarce resources is better able to ride out rough times. For example, during extended periods of economic growth and low unemployment, an economy can fund safety net programs (like Social Security, Medicare, unemployment insurance) to help those in need during hard times. If, on the other hand, an economy remains stagnant due to inefficient use of resources, then safety net programs go underfunded and may not provide adequate protection to those suffering in both an economic and literal sense.

We will see, using the supply and demand framework, how free markets use tools like communication and competition to ensure that waste is identified and cleared before it accumulates thereby increasing the chances for sustainability.

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