Do you eBay? Chances are, you do. According to its Web site, eBay has over forty-six million registered users; last year, $9.3 billion in goods were exchanged on the online auction site. As traditional retailers struggle to find a way to use the Internet for commerce, eBay seems to have discovered a profitable business model. According to a recent Newsweek cover story, “eBay signals the coming of age of postmodern, decentralized, virtual marketing.” While this may be true, the success of eBay also highlights an economic insight at least as old as Adam Smith: In a free market, where buyers and sellers voluntarily exchange goods and services, everyone is better off.
The author of the Newsweek report offers this example: Someone offered on eBay a broken Panasonic DVD player, still in the factory’s box, which he didn’t have the heart to throw away. Another, thinking he could fix it, bought it for $33.26, which would have been enough to buy sixteen crusty ancient Roman coins, also available on eBay. We might find this exchange of junk odd, but both people received things they wanted in exchange for things they didn’t. This free exchange thereby increases, in the words of the Newsweek author, “the sum total of happiness in the world”—as well as, I would add, the sum total of wealth in the world. As he concludes, “The Internet is the perfect device for the second most important form of human convergence, the meeting of buyers and sellers.”
Of course, the market alone cannot ensure human happiness. Nevertheless, we cannot disregard the fact that the creation of markets by the free concourse of buyers and sellers highlights two important virtues of capitalism. Through voluntary exchange, the free market not only efficiently distributes goods and services and creates wealth but also effectively encourages the peaceful cooperation of market actors. The Acton Institute strives to present the practical and moral arguments in favor of free markets to our religious and business leaders; I thank you for the support that allows us to do so.
Sincerely,Rev. Robert A. Sirico