Free market

In economics, a free market is a system in which the prices for goods and services are determined 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 by other authority. 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 free-market anarchists, market socialists, and some proponents of cooperatives and advocates of profit sharing.[1] 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.

Economic systems

Laissez-faire economics

The laissez-faire principle expresses a preference for an absence of non-market pressures on prices and wages, such as those from discriminatory government taxes, subsidies, tariffs, regulations of purely private behavior, or government-granted or coercive monopolies. Friedrich Hayek argued in The Pure Theory of Capital that the goal is the preservation of the unique information contained in the price itself.[2]

The definition of free market has been disputed and made complex by collectivist political philosophers and socialist economic ideas.[3] This contention arose from the divergence from classical economists such as Richard Cantillon, Adam Smith, David Ricardo, and Thomas Robert Malthus, and from the continental economic science developed primarily by the Spanish scholastic and French classical economists, including Anne-Robert-Jacques Turgot, Baron de Laune, Jean-Baptiste Say and Frédéric Bastiat.

During the marginal revolution, subjective value theory was rediscovered.[4]

Socialist economics

Various forms of socialism based on free markets have existed since the 19th century. Early notable socialist proponents of free markets include Pierre-Joseph Proudhon, Benjamin Tucker, and the Ricardian socialists. These economists believed that genuinely free markets and voluntary exchange could not exist within the exploitative conditions of capitalism.

These proposals ranged from various forms of worker cooperatives operating in a free market economy, such as the mutualist system proposed by Proudhon, to state-owned enterprises operating in unregulated and open markets. These models of socialism are not to be confused with other forms of market socialism (e.g. the Lange model) where publicly owned enterprises are coordinated by various degrees of economic planning, or where capital good prices are determined through marginal cost pricing.

Advocates of free-market socialism such as Jaroslav Vanek argue that genuinely free markets are not possible under conditions of private ownership of productive property. Instead, he contends that the class differences and inequalities in income and power that result from private ownership enable the interests of the dominant class to skew the market to their favor, either in the form of monopoly and market power, or by utilizing their wealth and resources to legislate government policies that benefit their specific business interests.[5] Additionally, Vanek states that workers in a socialist economy based on cooperative and self-managed enterprises have stronger incentives to maximize productivity because they would receive a share of the profits (based on the overall performance of their enterprise) in addition to receiving their fixed wage or salary.

Socialists also assert that free market capitalism leads to an excessively skewed distribution of income, which in turn leads to social instability. As a result, corrective measures in the form of social welfare, re-distributive taxation, and administrative costs are required, which end up being paid into workers hands who spend and help the economy to run. They claim corporate monopolies run rampant in free markets, with endless agency over the consumer. Thus, free market socialism desires government regulation of markets to prevent social instability, although at the cost of taxpayer dollars.[6]

Geoist economics

As explained above, for classical economists such as Adam Smith the term "free market" does not necessarily refer to a market free from government interference, but rather free from all forms of economic privilege, monopolies, and artificial scarcities.[3] This implies that economic rents, i.e. profits generated from a lack of perfect competition, must be reduced or eliminated as much as possible through free competition.

Economic theory suggests the returns to land and other natural resources are economic rents that cannot be reduced in such a way because of their perfect inelastic supply.[7] Some economic thinkers emphasize the need to share those rents as an essential requirement for a well functioning market. It is suggested this would both eliminate the need for regular taxes that have a negative effect on trade (see deadweight loss) as well as release land and resources that are speculated upon or monopolised. Two features that improve the competition and free market mechanisms. Winston Churchill supported this view by his statement "Land is the mother of all monopoly".[8]

The American economist and social philosopher Henry George, the most famous proponent of this thesis, wanted to accomplish this through a high land value tax that replaces all other taxes.[9] Followers of his ideas are often called Georgists or Geoists and Geolibertarians.

Léon Walras, one of the founders of the neoclassical economics who helped formulate the general equilibrium theory, had a very similar view. He argued that free competition could only be realized under conditions of state ownership of natural resources and land. Additionally, income taxes could be eliminated because the state would receive income to finance public services through owning such resources and enterprises.[10]

Non-laissez-faire capitalist systems

The stronger incentives to maximize productivity that Vanek conceives as possible in a socialist economy based on cooperative and self-managed enterprises might be accomplished in a capitalistic free market if employee-owned companies were the norm, as envisioned by various thinkers including Louis O. Kelso and James S. Albus.

Concepts

Perfect competition and market failure

Conditions that must exist for unregulated markets to behave as "free markets" are summarized at perfect competition. An absence of any of these perfect competition ideal conditions is a "market failure." Most schools of economics allow that regulatory intervention may provide a substitute force to counter a market failure. Under this thinking, this form of market regulation may be better than an unregulated market at providing a "free market."

Supply and demand

Demand for an item (such as goods or services) refers to the market pressure from people trying to buy it. Buyers have a maximum price they are willing to pay and sellers have a minimum price they are willing to offer their product. The point at which the supply and demand curves meet is the equilibrium price of the good and quantity demanded. Sellers willing to offer their goods at a lower price than the equilibrium price receive the difference as producer surplus. Buyers willing to pay for goods at a higher price than the equilibrium price receive the difference as consumer surplus.[11]

The model is commonly applied to wages in the market for labor. The typical roles of supplier and consumer are reversed. The suppliers are individuals, who try to sell (supply) their labor for the highest price. The consumers are businesses, which try to buy (demand) the type of labor they need at the lowest price. As more people offer their labor in that market, the equilibrium wage decreases and the equilibrium level of employment increases as the supply curve shifts to the right. The opposite happens if fewer people offer their wages in the market as the supply curve shifts to the left.[11]

In a free market, individuals and firms taking part in these transactions have the liberty to enter, leave and participate in the market as they so choose. Prices and quantities are allowed to adjust according to economic conditions in order to reach equilibrium and properly allocate resources. However, in many countries around the world, governments seek to intervene in the free market in order to achieve certain social or political agendas.[12] Governments may attempt to create social equality or equality of outcome by intervening in the market through actions such as imposing a minimum wage (price floor) or erecting price controls (price ceiling). Other lesser-known goals are also pursued, such as in the United States, where the federal government subsidizes owners of fertile land to not grow crops in order to prevent the supply curve from further shifting to the right and decreasing the equilibrium price. This is done under the justification of maintaining farmers' profits; due to the relative inelasticity of demand for crops, increased supply would lower the price but not significantly increase quantity demanded, thus placing pressure on farmers to exit the market.[13] Such interventions are often done in the name of maintaining basic assumptions of free markets, such as the idea that the costs of production must be included in the price of goods. Pollution and depletion costs are sometimes NOT included in the cost of production (a manufacturer that withdraws water at one location then discharges it polluted downstream, avoiding the cost of treating the water), so governments may opt to impose regulations in an attempt to try to internalize all of the cost of production (and ultimately include them in the price of the goods).

Advocates of the free market contend that government intervention hampers economic growth by disrupting the natural allocation of resources according to supply and demand, while critics of the free market contend that government intervention is sometimes necessary to protect a country's economy from better-developed and more influential economies, while providing the stability necessary for wise long-term investment. Milton Friedman pointed to failures of central planning, price controls and state-owned corporations, particularly in the Soviet Union and Communist China,[14] while Ha-Joon Chang cites the examples of post-war Japan and the growth of South Korea's steel industry.[15]

Economic equilibrium

General equilibrium theory has demonstrated, with varying degrees of mathematical rigor over time, that under certain conditions of competition, the law of supply and demand predominates in this ideal free and competitive market, influencing prices toward an equilibrium that balances the demands for the products against the supplies.[16] At these equilibrium prices, the market distributes the products to the purchasers according to each purchaser's preference (or utility) for each product and within the relative limits of each buyer's purchasing power. This result is described as market efficiency, or more specifically a Pareto optimum.

This equilibrating behavior of free markets requires certain assumptions about their agents, collectively known as perfect competition, which therefore cannot be results of the market that they create. Among these assumptions are several which are impossible to fully achieve in a real market, such as complete information, interchangeable goods and services, and lack of market power. The question then is what approximations of these conditions guarantee approximations of market efficiency, and which failures in competition generate overall market failures. Several Nobel Prizes in Economics have been awarded for analyses of market failures due to asymmetric information.

Low barriers to entry

A free market does not require the existence of competition, however it does require a framework that allows new market entrants. Hence, in the lack of coercive barriers, for example, paid licensing certification for certain services and businesses, competition between businesses flourishes all through the demands of consumers, or buyers. It often suggests the presence of the profit motive, although neither a profit motive or profit itself are necessary for a free market. All modern free markets are understood to include entrepreneurs, both individuals and businesses. Typically, a modern free market economy would include other features, such as a stock exchange and a financial services sector, but they do not define it.

Spontaneous order

Friedrich Hayek popularized the view that market economies promote spontaneous order which results in a better "allocation of societal resources than any design could achieve."[17] According to this view, in market economies are characterized by the formation of complex transactional networks which produce and distribute goods and services throughout the economy. These networks are not designed, but nevertheless emerge as a result of decentralized individual economic decisions. The idea of spontaneous order is an elaboration on the invisible hand proposed by Adam Smith in The Wealth of Nations. Smith wrote that the individual who:

By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest [an individual] frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the [common] good.

— Adam Smith, Wealth of Nations

Smith pointed out that one does not get one's dinner by appealing to the brother-love of the butcher, the farmer or the baker. Rather one appeals to their self-interest, and pays them for their labor.

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

— Adam Smith[18]

Supporters of this view claim that spontaneous order is superior to any order that does not allow individuals to make their own choices of what to produce, what to buy, what to sell, and at what prices, due to the number and complexity of the factors involved. They further believe that any attempt to implement central planning will result in more disorder, or a less efficient production and distribution of goods and services.

Critics, such as political economist Karl Polanyi, question whether a spontaneously ordered market can exist, completely free of "distortions" of political policy; claiming that even the ostensibly freest markets require a state to exercise coercive power in some areas – to enforce contracts, to govern the formation of labor unions, to spell out the rights and obligations of corporations, to shape who has standing to bring legal actions, to define what constitutes an unacceptable conflict of interest, etc.[19]

General principles

The Heritage Foundation, a right-wing think tank, tried to identify the key factors necessary to measure the degree of freedom of economy of a particular country. In 1986 they introduced the Index of Economic Freedom, which is based on some fifty variables. This and other similar indices do not define a free market, but measure the degree to which a modern economy is free, meaning in most cases, free of state intervention. The variables are divided into the following major groups:

  • Trade policy,
  • Fiscal burden of government,
  • Government intervention in the economy,
  • Monetary policy,
  • Capital flows and foreign investment,
  • Banking and finance,
  • Wages and prices,
  • Property rights,
  • Regulation, and
  • Informal market activity.

These free market principles are what helped America transition to a free market economy. International free trade improved the country and in order for Americans to prosper from a strong economy they had no choice but to embrace it.[20] Each group is assigned a numerical value between 1 and 5; IEF is the arithmetical mean of the values, rounded to the nearest hundredth. Initially, countries which were traditionally considered capitalistic received high ratings, but the method improved over time. Some economists, like Milton Friedman and other laissez-faire economists have argued that there is a direct relationship between economic growth and economic freedom, and some studies suggest this is true.[21] Ongoing debates exist among scholars regarding methodological issues in empirical studies of the connection between economic freedom and economic growth. These debates and studies continue to explore just what that relationship entails.[22][23][24]

The Free Market Monument Foundation defines the principles of a free market as:[25]

  1. Individual Rights: "We are each created with equal individual rights to control and to defend our life, liberty and property and to voluntary contractual exchange."
  2. Limited Government: "Governments are instituted only to secure individual rights, deriving their just powers from the consent of the governed."
  3. Equal Justice Under Law: "Government must treat everyone equally; neither rewarding failure nor punishing success."
  4. Subsidiarity: "Government authority must reside at the lowest feasible level."
  5. Spontaneous Order: "When individual rights are respected, unregulated competition will maximize economic benefit for society by providing the most goods and services possible at the lowest cost."
  6. Property Rights: "Private ownership is the most efficient way to sustainably utilize resources."
  7. The Golden Rule: "Deal with others honestly and require honesty in return."

Criticisms

Critics of the free market have argued that, in real world situations, it has proven to be susceptible to the development of price fixing monopolies.[26] Such reasoning has led to government intervention, e.g. the United States antitrust law.

Two prominent Canadian authors argue that government at times has to intervene to ensure competition in large and important industries. Naomi Klein illustrates this roughly in her work The Shock Doctrine and John Ralston Saul more humorously illustrates this through various examples in The Collapse of Globalism and the Reinvention of the World.[27] While its supporters argue that only a free market can create healthy competition and therefore more business and reasonable prices, opponents say that a free market in its purest form may result in the opposite. According to Klein and Ralston, the merging of companies into giant corporations or the privatization of government-run industry and national assets often result in monopolies (or oligopolies) requiring government intervention to force competition and reasonable prices.[27] Another form of market failure is speculation, where transactions are made to profit from short term fluctuation, rather from the intrinsic value of the companies or products.

This criticism has been challenged by historians such as Lawrence Reed, who argued that monopolies have historically failed to form even in the absence of anti-trust law.[28] This is because monopolies are inherently difficult to maintain: a company that tries to maintain its monopoly by buying out new competitors, for instance, is incentivizing newcomers to enter the market in hope of a buy-out.

American philosopher and author Cornel West has derisively termed what he perceives as dogmatic arguments for laissez-faire economic policies as "free-market fundamentalism". West has contended that such mentality "trivializes the concern for public interest" and "makes money-driven, poll-obsessed elected officials deferential to corporate goals of profit – often at the cost of the common good."[29] American political philosopher Michael J. Sandel contends that in the last 30 years the United States has moved beyond just having a market economy and has become a market society where literally everything is for sale, including aspects of social and civic life such as education, access to justice and political influence.[30] The economic historian Karl Polanyi was highly critical of the idea of the market-based society in his book The Great Transformation, noting that any attempt at its creation would undermine human society and the common good.[31]

Critics of free market economics range from those who reject markets entirely in favour of a planned economy as advocated by various Marxists, to those who wish to see market failures regulated to various degrees or supplemented by government interventions. Keynesians support market roles for government, such as using fiscal policy for economic stimulus when actions in the private sector lead to sub-optimal economic outcomes of depressions or recessions. Business cycle theory is used by Keynesians to explain liquidity traps, by which underconsumption occurs, to argue for government intervention with fiscal policy.

Some would argue, only one known example of a true free market exists, which is the black market. The black market is under constant threat by the police, but under no circumstances do the police regulate the substances that are being created. The black market produces wholly unregulated goods, and are purchased and consumed unregulated. That is to say, anyone can produce anything at any time, and anyone can purchase anything available at any time. The alternative view is that the black market is not a free market at all since high prices and monopolies are often enforced through murder, theft and destruction. Black markets can only exist peripheral to regulated markets where laws are being regularly enforced.

See also

Notes

  1. ^ Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. ISBN 978-0-8047-7566-3.
  2. ^ The Pure Theory of Capital, F.A. Hayek, 1941
  3. ^ a b Popper, Karl (1994). The Open Society and Its Enemies. Routledge Classics. ISBN 978-0-415-61021-6.
  4. ^ Popper, Karl (2002). The Poverty of Historicism. Routledge Classics. ISBN 0415278465.
  5. ^ "Cooperative Economics: An Interview with Jaroslav Vanek", interview by Albert Perkins. Retrieved March 17, 2011: http://www.ru.org/51cooper.html
  6. ^ The Political Economy of Socialism, by Horvat, Branko. 1982. (pp. 197–98)
  7. ^ Adam Smith, The Wealth of Nations Book V, Chapter 2, Part 2, Article I: Taxes upon the Rent of Houses
  8. ^ House Of Commons May 4th; King's Theatre, Edinburgh, July 17
  9. ^ Backhaus, "Henry George's Ingenious Tax," pp. 453–58.
  10. ^ Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. p. 21. ISBN 978-0-8047-7566-3. For Walras, socialism would provide the necessary institutions for free competition and social justice. Socialism, in Walras's view, entailed state ownership of land and natural resources and the abolition of income taxes. As owner of land and natural resources, the state could then lease these resources to many individuals and groups, which would eliminate monopolies and thus enable free competition. The leasing of land and natural resources would also provide enough state revenue to make income taxes unnecessary, allowing a worker to invest his savings and become 'an owner or capitalist at the same time that he remains a worker.
  11. ^ a b Judd, K. L. (1997). "Computational economics and economic theory: Substitutes or complements?". Journal of Economic Dynamics and Control. 21 (6): 907–42. doi:10.1016/S0165-1889(97)00010-9.
  12. ^ "Archived copy". Archived from the original on 2014-05-22. Retrieved 2014-06-06.CS1 maint: Archived copy as title (link)
  13. ^ "Farm Program Pays $1.3 Billion to People Who Don't Farm". Washington Post. 2 July 2006. Retrieved 3 June 2014.
  14. ^ Ip, Greg and Mark Whitehouse, "How Milton Friedman Changed Economics, Policy and Markets", Wall Street Journal Online (November 17, 2006).
  15. ^ "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism", Ha-Joon Chang, Bloomsbury Press, ISBN 978-1596915985
  16. ^ Theory of Value, by Gérard Debreu
  17. ^ Hayek cited. Petsoulas, Christina. Hayek's Liberalism and Its Origins: His Idea of Spontaneous Order and the Scottish Enlightenment. Routledge. 2001. p. 2
  18. ^ Smith, Adam (1776). "2". Wealth of Nations. 1. London: W. Strahan and T. Cadell.
  19. ^ Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class by Jacob S. Hacker and Paul Pierson, Simon & Schuster 2010, p. 55
  20. ^ Hunt, Michael H (2004). The World Transformed: 1945 To The Present. Boston: Bedford/St. Martin's: Oxford University Press. p. 313.
  21. ^ Ayal, Eliezer B. and Karras, Georgios. "Components of Economic Freedom and Growth." Archived 2008-05-27 at the Wayback Machine Journal of Developing Areas, Vol. 32, No. 3, Spring 1998, pp. 327–38. Publisher: Western Illinois University.
  22. ^ COLE, Julio H. and LAWSON, Robert A. Handling Economic Freedom in Growth Regressions: Suggestions for Clarification. Econ Journal Watch, Volume 4, Number 1, January 2007, pp. 71–78.
  23. ^ DE HAAN, Jacob and STURM, Jan-Egbert. How to Handle Economic Freedom: Reply to Lawson. Econ Journal Watch, Volume 3, Number 3, September 2006, pp. 407–411.
  24. ^ DE HAAN, Jacob and STURM, Jan-Egbert. Handling Economic Freedom in Growth Regressions: A Reply to Cole and Lawson. Econ Journal Watch, Volume 4, Number 1, January 2007, pp. 79–82.
  25. ^ Principles of the Free Market Free Market Monument Foundation, 2009
  26. ^ Tarbell, Ida (1904). The History of the Standard Oil Company. McClure, Phillips and Co.
  27. ^ a b Saul, John The End of Globalism.
  28. ^ "Cliche #41: “Rockefeller’s Standard Oil Company Proved That We Needed Anti-Trust Laws to Fight Such Market Monopolies", The Freeman, January 23, 2015. Retrieved December 20, 2016.
  29. ^ "Cornel West: Democracy Matters", The Globalist, January 24, 2005. Retrieved October 9, 2014.
  30. ^ Michael J. Sandel (June 2013). Why we shouldn't trust markets with our civic life. TED. Retrieved January 11, 2015.
  31. ^ Henry Farrell (July 18, 2014). The free market is an impossible utopia. The Washington Post. Retrieved January 11, 2015.

Further reading

External links

Adam Smith

Adam Smith (16 June [O.S. 5 June] 1723 – 17 July 1790) was a Scottish economist, philosopher and author as well as a moral philosopher, a pioneer of political economy and a key figure during the Scottish Enlightenment. Smith wrote two classic works, The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The latter, often abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics.

Smith studied social philosophy at the University of Glasgow and at Balliol College, Oxford, where he was one of the first students to benefit from scholarships set up by fellow Scot John Snell. After graduating, he delivered a successful series of public lectures at Edinburgh, leading him to collaborate with David Hume during the Scottish Enlightenment. Smith obtained a professorship at Glasgow, teaching moral philosophy and during this time, wrote and published The Theory of Moral Sentiments. In his later life, he took a tutoring position that allowed him to travel throughout Europe, where he met other intellectual leaders of his day.

Smith laid the foundations of classical free market economic theory. The Wealth of Nations was a precursor to the modern academic discipline of economics. In this and other works, he developed the concept of division of labour and expounded upon how rational self-interest and competition can lead to economic prosperity. Smith was controversial in his own day and his general approach and writing style were often satirised by Tory writers in the moralising tradition of William Hogarth and Jonathan Swift. In 2005, The Wealth of Nations was named among the 100 best Scottish books of all time.

Agorism

Agorism is a libertarian social philosophy that advocates creating a society in which all relations between people are voluntary exchanges by means of counter-economics, thus engaging with aspects of peaceful revolution. It was first proposed by libertarian philosopher Samuel Edward Konkin III (1947–2004) at two conferences, "CounterCon I" in October 1974 and "CounterCon II" in May 1975.

Anarcho-capitalism

Anarcho-capitalism is a political philosophy and school of anarchist thought that advocates the elimination of centralized state dictum in favor of self-ownership, private property and free markets. Anarcho-capitalists hold that in the absence of statute (law by arbitrary autocratic decrees, or bureaucratic legislation swayed by transitory political special interest groups), society tends to contractually self-regulate and civilize through the spontaneous and organic discipline of the free market (in what its proponents describe as a "voluntary society").In an anarcho-capitalist society, law enforcement, courts and all other security services would be operated by privately funded competitors selected by consumers rather than centrally through confiscatory taxation. Money, along with all other goods and services, would be privately and competitively provided in an open market. Personal and economic activities under anarcho-capitalism would therefore be regulated by victim-based dispute resolution organizations under tort and contract law, rather than by statute through centrally determined punishment under political monopolies, which tend to become corrupt in proportion to their monopolization.Various theorists have espoused legal philosophies similar to anarcho-capitalism. However, the first person to use the term was Murray Rothbard who, in the mid-20th century, synthesized elements from the Austrian School of economics, classical liberalism and 19th-century American individualist anarchists Lysander Spooner and Benjamin Tucker (while rejecting their labor theory of value and the norms they derived from it). A Rothbardian anarcho-capitalist society would operate under a mutually agreed-upon libertarian "legal code which would be generally accepted, and which the courts would pledge themselves to follow". This pact would recognize self-ownership, property, contracts, and tort law, in keeping with the universal non-aggression principle (NAP).

Anarcho-capitalists are distinguished from minarchists, who advocate a small Jeffersonian night-watchman state limited to protecting individuals and their properties from foreign and domestic aggression; and from other anarchists who seek to prohibit or regulate the accumulation of private property and the flow of capital.

Classical liberalism

Classical liberalism is a political ideology and a branch of liberalism which advocates civil liberties under the rule of law with an emphasis on economic freedom. Closely related to economic liberalism, it developed in the early 19th century, building on ideas from the previous century as a response to urbanization and to the Industrial Revolution in Europe and the United States. Notable individuals whose ideas contributed to classical liberalism include John Locke, Jean-Baptiste Say, Thomas Robert Malthus and David Ricardo. It drew on the classical economic ideas espoused by Adam Smith in Book One of The Wealth of Nations and on a belief in natural law, utilitarianism and progress. The term "classical liberalism" has often been applied in retrospect to distinguish earlier 19th-century liberalism from social liberalism.

Consequentialist libertarianism

Consequentialist libertarianism (also known as libertarian consequentialism or consequentialist liberalism, in Europe) refers to the libertarian position that is supportive of a free market and strong private property rights only on the grounds that they bring about favorable consequences, such as prosperity or efficiency.

David D. Friedman

David Director Friedman (born February 12, 1945) is an American economist, physicist, legal scholar, and libertarian theorist. He is known for his textbook writings on microeconomics and the libertarian theory of anarcho-capitalism, which is the subject of his most popular book, The Machinery of Freedom. Besides The Machinery of Freedom, he has authored several other books and articles, including Price Theory: An Intermediate Text (1986), Law's Order: What Economics Has to Do with Law and Why It Matters (2000), Hidden Order: The Economics of Everyday Life (1996), and Future Imperfect (2008).

Democratic capitalism

Democratic capitalism, also known as capitalist democracy, is a political, economic and social ideology that involves the combination of a liberal democratic political system with a capitalist economic system. It is based on a tripartite arrangement of a private sector-driven market economy based predominantly on a liberal democratic policy, economic incentives through free markets, fiscal responsibility and a liberal moral-cultural system which encourages pluralism. This ideology supports a capitalist economy subject to control by a democratic political system that is supported by the majority. It stands in contrast to corporatism by limiting the influence of special interest groups, including corporate lobbyists, on politics.

It is argued that the coexistence of modern capitalism and democracy was the result of the creation of the modern welfare state in the post-war period, which enabled a relatively stable political atmosphere and widespread support for capitalism. This period of history is often referred to as the "Golden Age of Capitalism".

Economic liberalism

Economic liberalism is an economic system organized on individual lines, which means the greatest possible number of economic decisions are made by individuals or households rather than by collective institutions or organizations. It includes a spectrum of different economic policies, such as freedom of movement, but its basis is on strong support for a market economy and private property in the means of production. Although economic liberals can also be supportive of government regulation to a certain degree, they tend to oppose government intervention in the free market when it inhibits free trade and open competition.

Economic liberalism is associated with free markets and private ownership of capital assets. Historically, economic liberalism arose in response to mercantilism and feudalism. Today, economic liberalism is also considered opposed to non-capitalist economic orders, such as socialism and planned economies. It also contrasts with protectionism because of its support for free trade and open markets.

An economy that is managed according to these precepts may be described as a liberal economy.

Fiscal conservatism

Fiscal conservatism (also economic conservatism or conservative economics) is a political-economic philosophy regarding fiscal policy and fiscal responsibility advocating low taxes, reduced government spending and minimal government debt. Free trade, deregulation of the economy, lower taxes, and privatization are the defining qualities of fiscal conservatism. Fiscal conservatism follows the same philosophical outlook of classical liberalism and economic liberalism. The term has its origins in the era of the New Deal during the 1930s as a result of the policies initiated by reform or modern liberals, when many classical liberals started calling themselves conservatives as they did not wish to be identified with what was passing for liberalism.In the United States the term liberalism has become associated with the welfare state and expanded regulatory policies created as a result of the New Deal and its offshoots from the 1930s onwards. Fiscal conservatives form one of the three legs of the traditional conservative movement in the United States, together with social conservatism and national defense conservatism. Many Americans who are classical liberals also tend to identify as libertarian, holding more socially liberal views and advocating a non-interventionist foreign policy while supporting lower taxes and less government spending.

Free-market anarchism

Free-market anarchism, or market anarchism, includes several branches of anarchism that advocate an economic system based on voluntary market interactions without the involvement of the state. A branch of market anarchism is left-wing market anarchism such as mutualists or Gary Chartier and Kevin Carson, who consider themselves anti-capitalists and self identify as part of the socialist movement.On the other hand, people who identify as anarcho-capitalists stress the legitimacy and priority of private property, describing it as an integral component of individual rights and a free market economy. There is a strong current within anarchism which does not consider that anarcho-capitalism can be considered a part of the anarchist movement because anarchism has historically been an anti-capitalist movement and for definitional reasons which see anarchism incompatible with capitalist forms. Thus, the term may be used to refer to diverse economic and political concepts, such as those proposed by anarchist libertarian socialists like Pierre-Joseph Proudhon and Benjamin Tucker or alternatively anarcho-capitalists like Murray Rothbard and David D. Friedman.

Free-market environmentalism

Free-market environmentalism argues that the free market, property rights, and tort law provide the best means of preserving the environment, internalizing pollution costs, and conserving resources.

Free-market environmentalists therefore argue that the best way to protect the environment is to clarify and protect property rights. This allows parties to negotiate improvements in environmental quality. It also allows them to use torts to stop environmental harm. If affected parties can compel polluters to compensate them they will reduce or eliminate the externality. Market proponents advocate changes to the legal system that empower affected parties to obtain such compensation. They further claim that governments have limited affected parties' ability to do so by complicating the tort system to benefit producers over others.

Laissez-faire

Laissez-faire (; French: [lɛsefɛʁ] (listen); from French: laissez faire, lit. 'let do') is an economic system in which transactions between private parties are free from government intervention such as regulation, privileges, tariffs and subsidies. The phrase laissez-faire is part of a larger French phrase and translates to "let (it/them) do", but in this context usually means "let go".

Libertarian conservatism

Libertarian conservatism or conservative libertarianism is a political philosophy and ideology that combines right-libertarian politics and conservative values. Libertarian conservatism advocates the greatest possible economic liberty and the least possible government regulation of social life, mirroring laissez-faire liberalism, but harnesses this to a belief in a more traditional and conservative social philosophy emphasizing authority and duty. Libertarian conservatism prioritizes liberty as its main emphasis, promoting free expression, freedom of choice and free market capitalism to achieve socially and culturally conservative ends as they reject liberal social engineering, or in the opposite way but not excluding the above, libertarian conservatism could be understood as promoting civil society through conservative institutions and authority - as family, fatherland, religion, education - in the quest of libertarian ends for less state power.

Market economy

A market economy is an economic system in which the decisions regarding investment, production, and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.Market economies range from minimally regulated "free market" and laissez-faire systems—where state activity is restricted to providing public goods and services and safeguarding private ownership—to interventionist forms where the government plays an active role in correcting market failures and promoting social welfare. State-directed or dirigist economies are those where the state plays a directive role in guiding the overall development of the market through industrial policies or indicative planning—which guides but does not substitute the market for economic planning—a form sometimes referred to as a mixed economy.Market economies are contrasted with planned economies where investment and production decisions are embodied in an integrated economy-wide economic plan and economy’s means of production are owned and operated by a single organizational body.

Market fundamentalism

Market fundamentalism (also known as free market fundamentalism) is a term applied to a strong belief in the ability of unregulated laissez-faire or free market policies to solve most economic and social problems.

Neoliberalism

Neoliberalism or neo-liberalism is the 20th-century resurgence of 19th-century ideas associated with laissez-faire economic liberalism and free market capitalism. Those ideas include economic liberalization policies such as privatization, austerity, deregulation, free trade and reductions in government spending in order to increase the role of the private sector in the economy and society. These market-based ideas and the policies they inspired constitute a paradigm shift away from the post-war Keynesian consensus which lasted from 1945 to 1980.English-speakers have used the term "neoliberalism" since the start of the 20th century with different meanings, but it became more prevalent in its current meaning in the 1970s and 1980s, used by scholars in a wide variety of social sciences as well as by critics. Modern advocates of free market policies avoid the term "neoliberal" and some scholars have described the term as meaning different things to different people as neoliberalism "mutated" into geopolitically distinct hybrids as it travelled around the world. As such, neoliberalism shares many attributes with other concepts that have contested meanings, including democracy.The definition and usage of the term have changed over time. As an economic philosophy, neoliberalism emerged among European liberal scholars in the 1930s as they attempted to trace a so-called "third" or "middle" way between the conflicting philosophies of classical liberalism and socialist planning. The impetus for this development arose from a desire to avoid repeating the economic failures of the early 1930s, which neoliberals mostly blamed on the economic policy of classical liberalism. In the decades that followed, the use of the term "neoliberal" tended to refer to theories which diverged from the more laissez-faire doctrine of classical liberalism and which promoted instead a market economy under the guidance and rules of a strong state, a model which came to be known as the social market economy.

In the 1960s, usage of the term "neoliberal" heavily declined. When the term re-appeared in the 1980s in connection with Augusto Pinochet's economic reforms in Chile, the usage of the term had shifted. It had not only become a term with negative connotations employed principally by critics of market reform, but it also had shifted in meaning from a moderate form of liberalism to a more radical and laissez-faire capitalist set of ideas. Scholars now tended to associate it with the theories of Mont Pelerin Society economists Friedrich Hayek, Milton Friedman, and James M. Buchanan, along with politicians and policy-makers such as Margaret Thatcher, Ronald Reagan and Alan Greenspan. Once the new meaning of neoliberalism became established as a common usage among Spanish-speaking scholars, it diffused into the English-language study of political economy. By 1994, with the passage of NAFTA and with the Zapatistas' reaction to this development in Chiapas, the term entered global circulation. Scholarship on the phenomenon of neoliberalism has been growing over the last couple of decades.

Really Really Free Market

The Really, Really Free Market (RRFM) movement is a horizontally organized collective of individuals who form a temporary market based on an alternative gift economy. RRFM events are often hosted by people unaffiliated with any large organization and are encouraged to sprout up by anyone, at anytime, anywhere. The RRFM movement aims to counteract capitalism in a proactive way by creating a positive example to challenge the myths of scarcity and competition. The name Really Really Free Market is itself a play on words as it is a reinterpretation and re-envisioning of the term free market which generally refers to an economy of consumerism governed by supply and demand. The RRFM holds as a major goal to build a community based on sharing resources, caring for one another and improving the collective lives of all. Markets often vary in character, but they generally offer both goods and services. Participants bring unneeded items and food as well as skills and talents such as entertainment, massage, arts and crafts, language lessons, plants, haircuts, yoga, and more. A RRFM usually takes place in an open community space such as a public park or community commons.

Regulated market

A regulated market (RM) or controlled market is an idealized system where the government controls the forces of supply and demand, such as who is allowed to enter the market and/or what prices may be charged.It is common for some markets to be regulated under the claim that they are natural monopolies. For example, telecommunications, water, gas or electricity supply. Often, regulated markets are established during the partial privatisation of government controlled utility assets. A variety of forms of regulations exist in a regulated market. These include controls, oversights, anti-discrimination, environmental protection, taxation and labor laws.

In a regulated market, the government regulatory agency may legislate regulations that privilege special interests, known as regulatory capture.

Resource-based economy

A resource-based economy or natural-resource-based economy is the economy of a country whose gross national product or gross domestic product to a large extent comes from natural resources.

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