Free market

A free market is an idealised market where all transfers of money, goods, and services are devoid of coercion and theft (some definitions of "coercion" are inclusive of "theft").

Practice

While the free-market is an idealized abstraction, it is useful in understanding real markets whether artificially created and regulated by governments or non-governmental agencies, or the natural social phenomena such as the black market and the underground economy, which can be remarkably robust in persisting despite attempts to suppress these markets. Taxes and government regulation bias the equilibrium points of every large government-sanctioned economy in existence today, so that these economies are only relatively free or unfree. Monopolistic practices, cartels, externalities (like pollution), and asymmetrically distributed information are often cited as potential problems that may exist in a free-market economy. Knowledge bias can lead to what many may see as evils of such an economy, like insider trading, price fixing, price gouging, adverse selection, moral hazard, and the principal-agent problem which they claim justify government intervention to remedy. Some believe that the notion of a free market is inherently unachievable because they hold that governments create property rights and are fundamentally involved in markets through the enforcement of such rights. Others argue that the concept of property comes from natural law and therefore it is incorrect to see governments as creating markets.

Related Topics:
Black market - Underground economy - Monopolistic practices - Cartel - Externalities - Pollution - Insider trading - Price fixing - Price gouging - Adverse selection - Moral hazard - Principal-agent problem - Government - Property - Natural law

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