These forces push sellers to produce and consumers to buy. These forces
also cancel out – and thus sales occur - when the wishes of buyers match the
wishes of sellers. This is where sellers want to sell at the price at which buyers
want to buy, and they want to sell as much as buyers want to buy. In this way
market forces determine the price and quantity of goods sold in each particular
market, at the same time ensuring that the process is
satisfactory for both
buyers and sellers. Each obtains something that they want and so betters their
position by buying or selling in the market.
At least this is the situation with a market operating according to the model for
perfect competition. It is
also the position which is approximated in other
markets which are not perfectly competitive but are still competitive to a
reasonable extent.
As these forces drive the market, they receive coercive force from the state
through the law of property and the law of contract which underpin the market.
The state also provides a law of wrongs -
a criminal law and a civil law - to
protect the rights accorded by property and contract law.
Thus the market system organises production and distribution; it operates, to
use the phrase from Adam Smith (1723-1790), like an "invisible hand"
263
that
guides economic activity. It does this by two complementary means –
the
market organises production and distribution while competition drives it.
Law
All law is politics.
264
Markets regulate economic activity. Law, by contrast, is an all purpose
regulator since it can regulate any sphere of activity that it chooses (although
how well and how effectively it regulates is another question).
Power of the State
Governments of nation states in the twenty first century tend to be all
powerful. The national legislature, or in the case of a federation, the
combination of central and regional legislatures, usually has complete or near
complete power to legislate. The most common and justified restriction on this
power is a bill of rights which, in the extreme version, denies altogether the
legislature power to legislate in a way that infringes the rights designated in the
bill. While this marks out an area that is a no-go zone for legislation, it usually
leaves vast tracts of human activity unshielded from legislative action.
___________________
263
Adam Smith The Theory of Moral Sentiment
(1759) IV i 10, Adam Smith The
Wealth of Nations (1776) p423
264
Gilmore (1977) p 231, n 57
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