Power of Markets

In his book, "Naked Economics" Charles Wheelan argues that the soviet economy failed because the government regulated everything that the individuals needed. After a while, it became impossible for the government to regulate everything. Charles also talks about what are economy is based of of individuals trying to make themselves as wealthy as possible. Basically, Individuals seek to maximize utility and thans what are free market economy is based on. An example of this is would be an individual trying to save the most money he can on appliances on a house. He wants to save money because that is a utility we need most in America. He also relates firms to individuals, because like humans firms have to make decisions on how much products to produce, and at what prices to sell them. Both humans and the firms are significant because they keep the economy. If there is no consumption by the individuals then the economy would break down, and if firms do not produce enough products, than individuals would have serious problems. This interaction is an essential part of maintaining an economy. Charles also says that are market rewards scarcity, which basically means that products that are rare are more expensive. An example of this would be Diamonds and Silver, Diamonds cost a lot more because they are very rare. He says that the market provides things that we want to buy rather than things that we need.