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Tuesday

1

November 2011

Candy Capitalists

Written by , Posted in Free Markets

This NPR story on kids trading Halloween candy is definitely cute, but I think it’s also instructive. One part in particular stands out:

As the trading died down, the candy consumption began. Everyone seemed satisfied with the deals they had made. And if not, Tuesday at school would bring a whole new group of potential consumers to trade with.

Isn’t this interesting. Surely, everyone could not be satisfied? There must be a loser for every winner, right? For every one successful candy baron, there must be some number of exploited masses. At least, that’s what modern leftist economic ideas teach us. Though as this story illustrates, the reality is far different.

In voluntary exchange there are only winners. In order to trade one piece of candy for another, both children must desire the other’s candy more than their own. Thus, in trading they both win. Or as Milton Friedman summarized, “The most important single central fact about a free market is that no exchange takes place unless both parties benefit.”