For example, if your experience is anything like mine, you are treated almost like an old friend at most of the businesses you patronize. Take Target, as an example, since it’s likely you have one in your area. As you enter one of their stores employees there are likely to ask, “How’s your day going?” They make you feel welcome. When you check out they tell you to “Have a nice day.” Of course, that kind of behavior is not unique to Target. It is the rule, not the exception when you interact with any private business.
That kind of experience makes our days more pleasant. If we aren’t having a good day, it can help raise our spirits. These are behaviors that are widespread and significant. What makes them happen?
Part of the reason, of course, is simply the goodness of most of our fellow human beings. However, an important factor in explaining why it happens so frequently is the free market. The most fundamental element of a market economy is voluntary exchange.
Both words of the phrase “voluntary exchange” have profound implications. Since it’s voluntary both parties have power, that is, the ability to walk away from the transaction. Because it’s an exchange both parties gain something and both parties give up something. The buyer gives up money and gains a product or service, the seller receives money and gives up a product or service. Both participants end up better off or they would stop exchanging. Each participant exchanges something of less value to him than what he receives. Probably the most often cited quotation of Adam Smith’s Wealth of Nations is the following:
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity, but to their self-love, and never talk to them of our own necessities but to their advantages.
A central focus of economic analysis is the question of incentives. The dynamics of voluntary exchange demonstrate the power of incentives. Furthermore, the incentives inherent in voluntary exchange are generally beneficial to individuals and society. The incentives inherent in a market economy bring out the best in people, not always, but predominantly and billions of times each day.
The owners and employees of private businesses clearly have incentives to treat their customers well. Those customers almost always have alternatives available to them. The U.S. economy has never been more competitive. There are exceptions, of course, such as the current state of the health care sector.
You are treated like someone important by private businesses and their employees because you are important to them. Business owners and managers train their employees to be friendly and pleasant. Their well-being is inextricably connected to our well-being. Every customer-vendor relationship is a symbiotic relationship.
A kind of business for which I am particularly thankful for is restaurants. It amazes me that so many people are willing to start and operate restaurants. It is a tough, highly competitive kind of business. A conclusion I came to when I once worked in a restaurant is there seemed to be a new problem every ten minutes. Today it amazes me that restaurants can serve so many patrons so many meals of consistently high quality so promptly. Restaurants are only one of thousands of kinds of private businesses that make our lives more comfortable, enjoyable, and entertaining.
Private businesses are readily available sources of practical knowledge. One of the mottoes of Home Depot is, “You can do it! We can help.” They obviously have a strong incentive to increase the population of do-it-yourselfers, as do all hardware and building-supply stores.
The value and importance of on-the-job training provided by private businesses is so huge it would be almost impossible to measure. That training is all the more important in light of the failings of public schools.
So, this Thanksgiving give some thought to the blessings you experience often in your life such as those provided by private businesses. And give thanks for the free-market economy, the only place where private businesses can exist.
◼ Something Else to Give Thanks For November 25, 2015
Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at firstname.lastname@example.org.