Inspired by this thread.
Should price fixing be legal in a free market? (By price fixing I mean the agreement between suppliers to sell at an artificially inflated price).
Inspired by this thread.
Should price fixing be legal in a free market? (By price fixing I mean the agreement between suppliers to sell at an artificially inflated price).
Well, if it’s really a “free market”, then price fixing cannot be illegal. A free market is free, not regulated. I guess the real queston is: Are anti-price fixing laws a good regulation in a generally free market-- do they do more good than harm? The answer to that question is probably YES. It’s a small concession to regulation since true examples of price fixing are pretty rare, and competion is generally a good thing. Price fixing inhibits competition.
Once you have price fixing, it ceases to be a free market.
Yeah, but once you have regulations, it ceases to be a free market. A devil’s bargain, I guess, for us free market types…
Whether or not a market is “free” or not is not relevant to its function or the benefits it accrues. Desire for markets to be free per se is thus utterly misplaced.
What is important is whether or not a market is competitive. A market in which price fixing is permitted may be “free”, but it is distorted as much as a market dominated by, say, burdensome regulation and excessive redistribution of wealth.
BINGO! The welfare gains of “free markets” only obtain if the markets are competitive. The key element of a competitive market is that no producers or buyers can set the price; the market as a whole sets the price, all individual actors—even those colluding—are forced to accept the price the market sets.
So, for a “free market,” price fixing may or may not be an element, simply because the free market is not defined. It’s a political term, not an economic one.
js is right that the term “free market” has to be defined. IMO, since corporations are a legal fiction, it has to be from the perspective of the consumer - whatever gives them the most choices. After a while, if corporations become too powerful, it becomes a question of political, not economic, freedom.