Will a Capitalistic Free-Market Economy Always Optimally Allocate Resources?

Will a Capitalistic Free-Market Economy always optimally allocate resources? That is a very good question. I honestly believe there are flaws in every type of economy. Do certain economies do a little better than others do? Of course! I believe the very root of the problem is not the economy though, but lies with human greed. We always want more! We want more money, more space, more cars, more time, and just much, much more. Some individuals have a little more greed than the rest of want more even if more costs others their way of living, the air that they breathe, the water they drink or any other aspect that does not directly seem to affect their own lives.

A good example of human greed would be that of the Tragedy of the Commons. A commons is a communal lot used for grazing by the individuals who reside in that specific community. This common lot is a common resource for the entire community. With the Tragedy of the Commons, certain members of a community overused the common area lot until the lot either became temporarily or permanently damaged from overuse. By overgrazing the lot, these members completely eradicate this essential resource for everyone. These members wanted to get more use from the commons even though the expense of their use affected the entire community in a negative way.

Externalities are prices that do not reflect the full costs or benefits in production or consumption of a product or service. Sometimes these externalities are very negative to the environment such as air pollution and biohazard waste. Although these are harmful effects for everyone, they do not affect the price of the product and do not go into the consideration of a products success in the market. This is another way that human greed shows its ugly face. Big companies do not include these costs because that would make the success of their company not look as well, and may affect the contributions or monies that they may receive from others. Again, everyone wants more.

It is not all our faults that we act this way, society plays a big role in this. Society tells us that we cannot be happy unless we have more stuff. More stuff means having more money. My answer to what the problem consists of is greed.