If an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it. Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie, that one party can only gain at the expense of another
About this quote
- What does it mean?
- Friedman argues voluntary exchanges happen only when both parties benefit, and fallacies arise from assuming a fixed pie.
- In plain terms
- Voluntary trade means both sides win. Assuming one wins only if another loses is wrong.
- What can you take from it?
- Voluntary exchange benefits all parties involved.
Where it applies
Putting it to work
Questions to consider
- Do all trades benefit both parties?
- Is the pie fixed?
Another view
Power imbalances can make exchanges involuntary or unequal.
More from Milton Friedman
I am a limited-government libertarian.
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