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A free market is a term in economics that refers to an economy operating with little to no interference on the part of a government. The central pillar of free market economy is voluntary exchanges without the use of any kind of coercion or violence.<ref>Free Market, Concise Encyclopedia of Economics</ref> This type of economic philosophy is the backbone to the system of capitalism, and is sometimes referred to by the French phrase “laissez-faire,” meaning to “let be.” Free markets are largely dependent on the process of supply and demand, where prices are determined by the amount of the product in the market, as well as the number of consumers who wish to purchase that product. The market will punish business whose practices are not beneficial, as consumers will take their business elsewhere. Communism and socialism are the antithesis of the free market.

The opposite of a free market is a command system, in which the government regulates all businesses for the theoretical central planning of the economy, although this has been shown to have negative effects. Economist Friedrich Hayek warned however of mixing a planned economy with a competitive economy, “a mixture of the two means that neither will work.” <ref>Friedrich A. Hayek, ''Road to Serfdom'', Reader's Digest Condensed Version, April 1945, pg. 38.</ref>

A mixed economy contains both private-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and command economy. For example, the UK is said to have a free market economy in almost all goods and services but retains a bureaucratic socialized healthcare regime. This is justified on the grounds that it will ensure that British subjects have access to health care which is supported out of state coffers.

Libertarian economist Milton Friedman said,

:The most important single central fact about a free market is that no exchange takes place unless both parties benefit. ://www.brainyquote.com/quotes/quotes/m/miltonfrie173375.html

See also

References

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Snippet from Wikipedia: Free market

In economics, a free market is a system in which the prices for goods and services are self-regulated by the open market and by consumers. In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority and from all forms of economic privilege, monopolies and artificial scarcities. Proponents of the concept of free market contrast it with a regulated market in which a government intervenes in supply and demand through various methods such as tariffs used to restrict trade and to protect the local economy. In an idealized free-market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.

Scholars contrast the concept of a free market with the concept of a coordinated market in fields of study such as political economy, new institutional economics, economic sociology and political science. All of these fields emphasize the importance in currently existing market systems of rule-making institutions external to the simple forces of supply and demand which create space for those forces to operate to control productive output and distribution. Although free markets are commonly associated with capitalism within a market economy in contemporary usage and popular culture, free markets have also been advocated by anarchists, socialists and some proponents of cooperatives and advocates of profit sharing.

Criticism of the theoretical concept may regard systems with significant market power, inequality of bargaining power, or information asymmetry as less than free, with regulation being necessary to control those imbalances in order to allow markets to function more efficiently as well as produce more desirable social outcomes.

free_market.txt · Last modified: 2020/03/12 18:34 (external edit)