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").

Theory

If a government is present, its use of force in the marketplace is ideally limited to protecting the market participants from coercion, including protection of property rights and enforcement of contracts. The essence of a free market can be understood as a game in which the players compete according to a common set of rules that prevent coercion (including theft); the enforcement of these rules may be carried out by a neutral referee (government). Players in this game may have different skills, knowledge, and wealth, which may conflict with social norms of fairness, so a free market may not accord with what some would consider a fair market. Or, some may see the equal application of the rules to all participants as the essence of fairness. http://www.fff.org/freedom/0292d.asp This conception of a market as a pure economic system based on freedom from coercion among market participants as well as from government is in fundamental contrast to a command economy.

Related Topics:
Game - Social norm - Fairness - Economic system - Freedom - Command economy

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The law of supply and demand predominates in the idealized free market, influencing prices toward an equilibrium that balances the demands for the products against the supplies. At these equilibrium prices, the market distributes the products to the purchasers according to each purchaser's use (or utility) for each product and within the relative limits of each buyer's purchasing power. The necessary components for the functioning of an idealized free market include the complete absence of artificial price pressures from taxes, subsidies, tariffs, or government regulation (other than protection from coercion and theft), and no government-granted monopolies (usually classified as coercive monopoly by free market advocates) like the United States Post Office, Amtrak, arguably patents, etc.

Related Topics:
Supply and demand - Equilibrium - Purchasing power - Tariff - Government-granted monopolies - Coercive monopoly - United States Post Office - Amtrak - Patent

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The distribution of purchasing power in an economy depends to a large extent on the labor and financial markets, but also on other factors such as family relationships, inheritance, gifts and so on. Many theories describing the operation of a free market focus primarily on the markets for consumer products, and their description of the labor market or financial markets tends to be more complicated and controversial.

Related Topics:
Labor - Financial markets - Inheritance - Gift

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The free market can be seen as facilitating a form of decision-making through what is known as dollar voting, where a purchase of a product is tantamount to casting a vote for a producer to continue producing that product.

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