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  • Writer's pictureSam Wilks

The role of competition in driving economic growth in free markets

Competition is a fundamental driver of economic growth in free markets. Every prominent and credible economist emphasizes the importance of competition in driving innovation, efficiency, and productivity.

For instance, stressing the importance of the competitive process in allocating resources efficiently. In a free market, individuals and firms compete for resources by offering better products and services at lower prices. This competition leads to innovation and the discovery of new and better ways of producing goods and services. As a result, consumers benefit from lower prices, better quality, and greater variety.

Moreover, competition incentivizes firms to be more productive. When firms compete, they are forced to find ways to lower costs, increase efficiency, and improve their products. This process results in lower prices for consumers and higher profits for firms. Therefore, competition is a win-win for both consumers and producers. Competition promotes entrepreneurship and creativity, which are key drivers of economic growth. In a competitive market, entrepreneurs have the opportunity to introduce new products and services that better meet consumers' needs. These innovations lead to increased productivity, lower costs, and higher profits.

Competition leads to more efficient allocation of resources. In a competitive market, prices signal the scarcity of resources, and firms respond by using them more efficiently. This results in greater productivity and economic growth.

In a free market, knowledge is dispersed throughout society, and it is through competition that this knowledge is utilised most effectively. When firms compete, they are forced to find new ways of doing things and adopt best practices. This process leads to the spread of knowledge and the discovery of new and better ways of doing things.

When individuals are free to compete, they are free to choose their own paths in life and to pursue their own goals. This freedom promotes creativity and innovation and leads to economic growth.

In a free market, consumers are free to choose which products and services they wish to purchase. This creates a powerful incentive for firms to produce goods and services that meet consumers' needs and preferences.

A free market is essential for discovering the true value of goods and services. In a competitive market, prices reflect the subjective valuations of consumers and the scarcity of resources. Prices provide firms with the information they need to make rational decisions about production and investment. This process leads to efficient resource allocation and economic growth.

Competition leads to innovation, efficiency, productivity, and consumer sovereignty. It promotes entrepreneurship and creativity and facilitates the diffusion of knowledge. Moreover, competition is essential for preserving individual freedom and discovering the true value of goods and services.

As a business operator, I believe that policymakers should focus on promoting competition in markets. This can be achieved through policies that promote market entry, prevent anti-competitive practices, and ensure a level playing field for all market participants. By promoting competition, we can create a more dynamic and innovative economy that benefits all members of society.

Note from the Author. I am not a financial adviser, I have been a business owner, director, or partner in several businesses, and companies for over 2 decades and have a range of economic experiences that I share with others to be better educated in making the decision right for them. I am an advocate for free-trade policies and a reduction in government interventionism, due to its very harmful and obvious flaws. The opinions shared are my own and do not necessarily represent those whom I consult to, work for and with.

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