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Economics and Free Markets

An Introduction

By Howard Baetjer Jr.

When we stop to consider it, a free economy is a marvel. Millions of people, mostly unknown to one another, each producing some particular good or service, somehow manage to coordinate their actions in a vast, cooperative, productive order with no one in charge. How does it work?

Economics helps us understand. This book introduces the concepts on which all of economics is founded, concepts such as subjective value and gains from trade, scarcity and opportunity cost, thinking at the margin, division of labor, and comparative advantage. It then introduces the foundational theory with which we understand how market prices emerge and change to reflect changing conditions: supply and demand analysis. It also introduces the principles that underlie spontaneous economic order: market prices provide the information we need to coordinate our actions with others’ actions, while profit‐​and‐​loss feedback guides entrepreneurs as to how best to satisfy others’ wants. Private property rights and freedom of exchange give us the incentive to interact in mutually beneficial ways.

For more information on the Guide series, please visit Lib​er​tar​i​an​ism​.org.

About the Author

Howard Baetjer Jr. is a Lecturer in the Department of Economics at Towson University, where he teaches microeconomics, money and banking, comparative economic systems, and the history of economic thought. He is the author of Free Our Markets: A Citizens’ Guide to Essential Economics (2013) and Software as Capital: An Economic Perspective on Software Engineering (1998). He founded the Children’s Scholarship Fund Baltimore, a private scholarship‐​granting organization for low‐​income families.