Free Markets and the Critical Fourth R

The free market is often touted as the best, most efficient way to allocate resources and is treated as if free markets were “natural.” This brief article will discuss and elaborate on the crucial ingredient of “PERSONAL RESPONSIBILITY” and its necessity if free markets are to perform their role of efficient resource allocation. The first three “R’s” stand for EDUCATION (Reading, Writing, Arithmetic), but the fourth “R” (Personal Responsibility) is even more significant in that it under-girds the application of education. If personal responsibility is not taught and reinforced along with other educational tools, all economic systems, including those that emphasize “free markets” will under-perform and ultimately self-destruct.

The U.S. along with many other societies finds itself in a “personal responsibility crises,” where individuals either do not want to be personally responsible for their actions or do not understand HOW to be personally responsible. There is an ongoing battle between what has been termed “an Ownership Society” and a society based on “Government Entitlements.” Traditionally the role of government has been PROTECTION against predators (foreign and domestic), maintaining the Rules of the Game (the laws under which a particular society operates), and limited public works which have large external benefits for everyone. In the twentieth century this “protection role” began to shift more to a “provision role (education, retirement, housing, food and now health care),” and this has produced unforeseen consequences which have encouraged more and more people to shed their personal responsibilities with the expectations that others (usually Uncle Sam) will provide.

The remainder of this short article will investigate this crucial ingredient, personal responsibility, in terms of how it affects the functioning of a free market economic system and how we can encourage personal responsibility in decision-making. The foundation of a free market system is TRUST. The buyer must trust the seller to be honest in what is being brought to market, and the seller must trust the buyer to pay honestly and fully; and it is assumed that each party is knowledgeable enough about the product so that if an exchange is made, each party feels like he has benefited. Notice the responsibility here, not just in being TRUSTWORTHY, but also in being KNOWLEDGEABLE. The former character trait involves honesty, being careful how you give your word, and purposing to keep your word; while the latter trait involves time, effort and perhaps sacrifice- all in the name of personal responsibility.

God’s Word, the Bible, has much to say about personal responsibility. In fact in the latter verses of the first chapter of Genesis, man is given dominion over the Almighty’s creation (Dominion Covenant), and he is expected to exercise that dominion, UNDER GOD, a code word for responsibility. That responsibility begins with standards for right and wrong and includes serving others (“brother’s keeper”), denying oneself (doing what should be done even when it is undesirable or unpopular), and developing proper character traits (striving for excellence, submission to authority, perseverance). Perhaps in a later article, we will elaborate on these three basic areas of personal responsibility: proper standards, denying oneself, and developing proper character traits.

One last thing, PERSONAL RESPONSIBILITY must be learned- taught in the home, reinforced in school, and exhibited at home, in the workplace, in church, in the neighborhood, and throughout society; and this learning is accomplished best through repetition. “Train up a child in the way he SHOULD go, even when he is old he will not depart from it.” (Proverbs 22:6) There are times when the proper TRAINING involves allowing a person to reap the consequences of unwise decisions. This may be difficult in the short term, but it usually generates long term benefits in terms of responsible decision-making. May each of us strive to do our best to be personably responsible in the various situations God has placed us. To be continued….

William M. Penn, Ph. D.
Professor of Economics and Business
Belhaven College
Jackson, Mississippi