Thursday, July 7, 2011

What does 'free market' mean?

The Bluegrass Institute is a free market think tank. But what does "free market" mean?

In a new page entitled "Free market" on, Bluegrass Institute intern Brian Deignan does a great job of giving Kentuckians an introduction to some important components of freedom in the marketplace.

"In a free market, individuals or individual entities seek to exchange with others free from the threat of coercion," Deignan writes.

He points out the importance of "voluntary exchanges," which are "net-beneficial in nature, meaning both parties in a transaction expect to receive more in benefits than the costs incurred to them by giving up some of their property for some other property or service."

Deignan explains the importance of coordination -- but not on the part of some government bureaucrat.

Rather, explains, "in a free market individuals coordinate their market activity with that of others. This result is of no conscious intention of any market participant; instead, it is the workings of a functioning price system. The spontaneous coordination of all market participants reveals the cooperative nature of the free market, which usually relies on competition."

A vivid example of Deignan's point about competition is found in the great 1958 essay entitled simply "I, Pencil." It's one of the greatest statements on how the free market works.

1 comment:

Hempy said...

Your definition of "free market" is about as anti-capitalistic as it can be.

The Abrahamic covenant that it's to our mutual benefit to work for the good of all, or the common good, is the basis of Adam Smith's capitalism and picked up by our founders and incorporated into the Constitution.

Everyone should be made to contribute to defraying the costs of the whole society. In Wealth of Nations Smith wrote:

"What are the different methods in which the whole society may be made to contribute towards defraying the expenses incumbent on the whole society?"

Your definition of free market is the atheistic ideology of Ayn Rand that the market is to be separated from government. She rejected the values of the Abrahamic covenant.

Yet in her typical hypocritical conservative, atheistic ideology, she availed herself of Social Security and health care benefits.

In practice, she embraced the principles of the Abrahamic covenant for herself but preached rejecting it for other.

And you preach likewise.