Have we ever had a free market?

Governments always redistribute wealth, or more exactly they redistribute financial leverage; that is a function of all governments. How they redistribute it is the only difference between one political persuasion in power over others. I don’t see how a free market has existed in this country. Please explain to me how one can have a ‘free market’ if it is subject to any artificial advantages given to anyone by government? Especially when the ideal is to have the government provide minimum regulation?

If the government was to minimize all regulation wouldn’t giving artificial advantages a bribe? It can’t police the markets but it’s OK to infuse certain parties with cash? May I suggest that since government will always need to be creating the economic environment for business to exist, that it will always effect markets deeply and indelibly? It seems that if government needs to keep one hand off on regulation why should it be expected to to add any additional aid or incentives with the other hand to anyone? Shouldn’t a free market actually have little to no incentives outside of itself and the other market it interacts with? Yet the government nevertheless does business in the market all the time. Buying desks and cars and bridges and whatnot. In a sense, the less business the government does in the market, the greater market devalues itself.

And what about government creating jobs for needed infrastructure? Is that interference? Shouldn’t it be discouraged by free market ideals? Despite the need arising when industry cannot do it. Actually where is the market for it now? Supposedly the need for infrastructure repair and energy conservation work in homes and buildings is high but the problem with markets is that they cannot get ahead of the curve. Who is buying any of that now, in bulk? Markets can only, by nature, react. By the time emergency needs can be met on the marketplace’s terms, we are in crisis and it can be far too late. On the other hand, governments can and do create special markets when the need arises.

Secondly, how is it possible to have a free market and yet give tax credits to anyone? Aren’t you compromising on someone else’s equally good chance to succeed despite having less money? Should a free market allow at all for tax breaks, incentives, or subsidies? Shouldn’t only one’s net worth be their single advantage? Instead they have unfair advantages of financial leverage in the way of subsidies. Artificial tax loopholes not available to 98% of everyone else in the country. Laws that can be written in their favor. How is a free market possible if a even a single subsidy is given? Even zoning might be looked upon as artificial largess.

I work hard, pay my taxes and play by the rules. My debt load is small so why shouldn’t I have loan privileges similar to a well run solvent business? I’m reasonably liquid and in decent economic health. Why shouldn’t I be able to have something closer to the 17% megacorp tax rate scaled equally to my relative net worth? Can I get off-shore loop holes?

We have now for a long time had an unfair distribution of financial leverage in place at the top as I see it. We do give, we do need certain tax loopholes. And subsidies. These things have to be done sometimes, we all know it. Yet a distribution of economic leverage grows exponentially with the few business endeavors that succeed greatly. Why isn’t Wall Street’s growth kept much closer to Main Street’s by the free market? Our economic crisis is based on not knowing the true values of chopped up items on paper. Yes, exponential leverage for mega-wealthy in the short run created more capital quickly. Yet unrealistic artificial values also arose as we see nowadays. In this way, if financial leverage at the top is only 10 times greater than the rest of the country rather than 1000 times greater, wouldn’t we have a more stable and hearty economy despite slower growth?

Why wouldn’t a fair market be the closest thing to a free market? I posit that you must have government involved sometimes as an economic starter engine, sometimes as an enforcer. Sometimes as the overall architect to level the playing field as much as possible without removing incentives that move the market forward. And thus a fair market would be closer in the real world to the spirit of a free market.

Why do you think a free market would be a good thing?

I’m not saying it would be. In fact I tried to point out how it could be rather terrible. I don’t understand why people think we’ve had one all along, it seemed to be entangled rather than operating freely as I see it. I do suggest that a regulated fair market however might function closer in fact to an actual free market. I think of a freer market being one with inherent fairness built in to let winners win but not to enable a winner take all scenario. More people might succeed despite the pinnacle of success being somewhat lower, and losers might have a little more cushion to pick themselves up again sooner.

I don’t think we have ever had, or ever will have a free market. Some markets are freer than other, but there’s always people and groups manipulating it, pressuring it, or otherwise making it unfree. Whether it’s the government with taxes and regulations; or bigger businesses dumping goods to drive smaller ones out of business; or monopolies; or company towns with company scrip and company set prices; or companies cooperating to fix prices; or any number of other things. Even if you magically set up a real free market, it would be rendered unfree with great speed; there’s too many people who would profit from doing so, and who aren’t going to sacrifice profit out of some abstract desire for an ideologically pure free market.

One of the biggest errors of the people who rant and rave about the wonders of the untrammeled free market, is that they assume that only the government can or would even try to distort the market. That’s just not so.

It seems we have a thread bashing the “free market” every week and that those bashing the " free market" mostly have no idea what a " free market" really is. They create a straw man and then demolish it. As I have already repeatedly explained the difference between freedom and regulation of a market in other threads I will not repeat myself here. I will only repeat that those who assume a free market is an unregulated market are dead wrong.

According to who ? Not the free marketeers. Most of the time, when I hear people extol the wonders of a free market they make it clear that they regard any regulation at all as evil. Whenever there’s ANY sort of problem involving money or the economy, the solution is always cut taxes and slash regulations; the market will police itself. Supposedly.

No, that is not the function of all govermnents. The function of government is to create and enforce the laws and maintain infrastructure.

Part of that includes the enforcement laws related to business. The general intent of such laws is to enforce contracts, protect consumers, prevent unethical or corrupt business practices and to reduce business activities that reduce competetiveness in the markets.

And stop using the term “leverage”, you are using it wrong. The term means to take out debt in order to increase the equity of your business. For example a highly leveraged business is one that has taken out a large loan to build a new manufacturing plant.

It helps if you understand what a “free market” is or at least tell us how you define it. Are you talking about a “perfectly competetive” market? If so, that is just one kind of market and it isn’t appropriate to use it to model all industries and products. Due to economies of scale and their nature as highly capital intensive industries, certain markets are not perfectly competetive and naturally form monopolies (like the cable or utility company) or oligopolies where there are only a few large players (like the automotive or airline industries).

I don’t understand what you are trying to say here.

First of all, I believe the “megacorp tax rate” is %35. Second, you are not a business. There is no incentive to lower your personal tax rate so you can create jobs.

The current financial crisis is as much the fault of “Main Street” as it is Wall Street. Investment bankers weren’t buying homes they had no way to ever afford. They didn’t even sell the mortgages.

The whole Wall Street vs Main Street thing is stupid anyhow. It is largely a media creation in an attempt to portray “Main Street” as hard working “real Americans” while Wall Street is full of rich fat cats preying on them. I work in New York as does my girlfriend so for us “Wall Street” is “Main Street”.

That is what we have or at least attempt to have.
I’m not sure if you know what the “free market” is. Unless there is a compelling reason to do otherwise, sellers and buyers should be free to sell and buy their products, services or labor for whatever they can get for them, unregulated by the government. No one ever advocates a laissez faire system with no regulation though. The intent of regulation is to provide a fair playing field so people with information can’t take advantage of those without.

Some regulations make the market more free - for example anti-trust legislation that prevents collusion between companies. Some make it less free, like regulation that limits who a company can sell to or what they can sell. ALthough sometimes there may be a good reason for it (ie weapons and such or health standards).

That is because few people on this board appear to have a background or experience in business, finance or economics or those who do don’t discuss the topic. Not to sound patronizing, but most posters talk about the subject from the perspective of someone who’s only experience with the business world is an after school job.

While sailor and msmith are 100% correct in my book, so is this. When someone is for a “free market,” you really don’t know if they’re a nutter or not.

I was using the word leverage something of a generic term for individuals having similar financial benefits that larger companies have. You’re correct, its not the most appropriate term to use. An example of what I meant is that megacorp does not actually pay the 35% in taxes. Between continuous deferrals, tax shelters, etc. they may wind up putting into government coffers, in actual dollars, half that percentage, or less, or sometimes none. If they go bankrupt, they can usually reorganize and keep going unlike individuals. That is what I meant by leverage - or whatever better term I should use. These are special tools not available, even in a scaled down version, to individuals.

I understand the need for such tools, used to a limited extent to keep markets moving. My questions are how do free marketeers justify such artificial advantages being put into a system? And then compounding that, why they encourage such advantages to be scaled up so much exponentially rather than on a more linear scale? Essentially the bigger a company gets, the far more they can be removed from real world market pressure (or responsibilities such as pensions they are supposed to protect) due to government assistance rather than eventually being reigned back in.

I’m not sure that free marketers make these distinctions very clear. Left unchecked would we not have monopolies or oligopolies in every aspect of the market left unchecked by an ever more unregulated free market? Those beyond the sort of instances you have mentioned which by nature will have few competitors.

Basically, how do free marketeers justify financial infusions in the way of tax loopholes, subsidies, bailouts from the government while while at the same time saying that government should not be regulating how they do business? How can one possibly expect to extract government from the equation when it provides most of the infrastructure needed to do business and is one of the markets largest customers? They don’t want government intervention unless it helps them which seems unrealistic to me.

Judging by what I have heard from many free market supporters they come pretty close to advocating laissez faire as far as it can go. It seems to me that many of its supporters go beyond your definition to one that requires the government to become ever more hands off. It also strikes me that the government is not providing the people with as much information as they should get in a free market system. People might need less protection with better information. For instance, while people buying subprimes were at fault for purchasing something too good to be true, yet these mortgages where everywhere. They were so ubiquitous and yet how often did we hear any strong warnings from the government? Were the sellers required by law to be clear about the risks people were taking? Was gov’t investigating these mortgages or the derivatives they were being diced and diced into? Where was the government informing people that while subprimes were legal and easy to get, that they were extremely risky. When the government says little, or investigates little, people take it as assurance that there is no particular danger to engage in risky financial behavior. It seemed obvious to me subprimes were something like a ponzi scheme, but millions of other people thought it a perfectly acceptable risk.

As someone pointed out alread, you are creating a bit of a strawman by refering to “free marketers”.

The answer to the above question is that unless your product or service had a number of specific characteristics (no barriers to entry, indentical regardless of who makes it, etc), most markets will eventually consolidate into oligopolies. This is not necessarily a bad thing as the economy may not need a thousand widget makers.

Once again, I think you’ve created a strawman composit of every economic philosophy that disagrees with yours.

The short answer is busines people advocate whatever will put more money in their pocket. It is not illogical to oppose industry regulation that hurts their business while at the same time not opposing bailouts or tax incentives or even legislation that provides them with an ecoomic advantage.
The problem with any regulation, especially bad regulation is that it also create a drain on the economy. You can’t just make a regulation, you have to hire armies of accountants and lawyers and consultants and complaince experts and government agents to track, monitor and enforce them. So instead of investing in their company to grow and expand their business, these firms now have to spend that money on a bunch of beancounters who produce nothing other than “assurance”.

Well, we can discuss those hypothetical and anonymous “free marketers” in another thread. The OP is about something else so just bringing in some imaginary characters to bash is nothing else than the old straw man. Let us restrict ourselves to the OP and not try to smear one side with straw man arguments.

Since when have they been imaginary ?

Okay, since we are discussing exagerated caricatures I will tell you that I prefer the free unregulated market to the communist system which allows no private property and no personal liberty and which many people propose.

There’s a lot of confusion in these threads about what a free market is. Some extreme libertarians somehow have the idea that free market economics is a natural state of affairs, if only we didn’t have this onerous government on our backs. But that fails to explain why and how that government exists.

And the reason that government exists is that the first “governments” were nothing more than a couple of guys with swords who decided to go over to the next village and carry off any surplus goods. All the kingdoms and empires you ever heard of throughout history are just the same impulse writ large. Guys who spend all their time training to fight become expert fighters who can extort from the untrained peasants enough wealth that the fighters don’t have to spend their time working for a living and can spend all their time training to fight.

So where does the free market come from? Well, the aristocrats/bandits/mafiosi realized that while you can shear a sheep many times you can only skin him once. And so the swordsmen have an incentive to make the pot of money and goods they can steal as large as possible. So they create rules about what the peasants are allowed to do…peasants can’t steal from each other, only swordsmen are allowed to steal from peasants. Peasants can’t fight each other, only swordsmen are allowed to kill peasants. And so on. The point of all these rules is to create a situation where the peasants produce lots and lots of stealable goods.

A “free market” where anyone can exchange goods and services without fear of theft, extortion, murder or fraud is an unnatural state. It requires some sort of mechanism to punish theives, extortionists, murderers and frauds. What happens if Bill Gates hires a bunch of guys to burn down Google headquarters and steal all their stuff? A free market requires some sort of mechanism to prevent Bill Gates from doing this. What if you give Bill Gates $100 in return for a copy of Office 2007, and then he keeps your money and doesn’t give you the software? There has to be a mechanism where you can get your money back.

Without police, a free market is impossible. Without courts, a free market is impossible. Without soldiers, a free market is impossible. Without the rule of law, a free market is impossible. And the only way to ensure the rule of law without relying on the goodwill of a benevolent autocrat is democracy, since every autocrat no matter how benevolent must die someday, and then some other autocrat is going to take power.

Free market economics isn’t some sort of Rousseauian state of nature. It is a desirable state but it is highly artificial and requires a lot of effort to create and maintain.

Even if it did, it would fail to understand a free market. When people have proved things about the free market, they have not proved things about a laissez-faire economy necessarily, because they have assumed things like low barriers to entry and no ability for any firm to dictate price to any extent. I think there is ample evidence showing us either cannot happen in some markets or won’t happen due to monopoly and oligopoly power. Debate over externalities is also problematic.

There is much room for reasonable disagreement over the extent to which we can have a free market, and what, exactly, it takes government intervention to accomplish.

It is also worth noting that to some, a free market is proposed purely on moral grounds, in which case the question of efficiency or lack thereof is completely incidental, but it is not always easy to discover whether someone is arguing for a free market because they find it to be the best model for economic behavior or because they think it is the only moral way to go under some kind of individualism. Distinguishing these two camps is important in any discussion, let people talk at cross purposes.

One peasant may go along with this situation, but others will see it as detrimental to their self-interest. What is there to stop some peasants from becoming “swordsmen,” and challenging those in control? A lot of people just get tired of constant warfare, and see that it’s a lot more beneficial to engage in peaceful trade than fighting. It’s not just because they’re at the mercy of “swordsmen.”

Anyway, I would agree with the OP that–in the U.S., at least–there’s never been a completely “free” market. But people don’t always murder for money–so in that sense, for a very long time we haven’t had a “free” society in general.

Or to paraphrase something Terry Pratchett said, what happens to the jackals when the sheep organize and hire wolves ?

Lemur866 has a point about the origins of government; but it was long ago largely hijacked by people who aren’t especially interested in looting. Those people are now, at least in most non-dictatorships, largely relegated to organized crime and corporations. Organized crime in particular being a good example of what Lemur866’s early governments were about.

Ok, that’s not necessarily the purpose of government, but in some sense, all government functions are redistributive. Not everyone will benefit from each government service equally, and not everyone will pay taxes equally. You could theoretically have a government that functioned entirely from user fees, but that wouldn’t be practical.

That’s not what we really characterize as wealth redistribution. But aside from that, I can’t think of a single government from the colonial era onwards that hasn’t engaged in wealth redistribution.

I agree with Lemur866 in a lot of what he’s saying. Nonetheless, as I said on another discussion, markets are markets. They will find a way around whatever laws or regulations or instituted. That’s why you can buy marijuana and smoke it till the cows come home.

Should we have rules and regulations? Of course, that’s what makes society work. But to think that markets work independently of regulation is a fool’s game.

And, of course, I should have said: Markets work *don’t * work independently of regulation is a fool’s game.