What does it mean for a market to be “free”?
Does this mean without government interference?
If there is collusion between large companies or a monopoly to control prices is it still a “free market”?
If there are safety laws regarding types of products sold, truth in advertising laws, or other laws to eliminate caveat emptor situations, would that still be a free market?
If any of these conditions are necessary, do you want a free market?
This is impossible (barring anarchy), so no.
It depends on how this happened, so maybe.
Most probably, but this situation can be taken quite far as “safe” is a pretty relative term. Some people don’t feel safe until there is a living wage, some don’t feel safe until there is free health care and a living wage, etc.
A free market, to me, is one in which the macro fate of the economy is not tampered with by high-level entities for the sake of tampering with the macro fate (i.e.—no intentional acts to affect the entire economy). Most free markets are characterized by choice on the part of the consumers in the market, thus justifying anti-monopoly laws and actions taken by government.
Yes, we want them in many cases. No, it isn’t fit to be the sole engine of goods and services production or distribution. Which, exactly, is a matter of some debate. Most would agree that the military, for example, as the materialization of national defense, should not be handled with a market—but in what way? For aren’t their salaries in some way competitive with what they might make on the open market? Indeed. The market will influence anything it could in principle address (even if poorly) if this engine of production/service is taken out of the free market. Education is another example.
So choice on the part of the consumers would outweigh in some instances choice on the part of the producers?
Would it be fair to say that ultimately a free market should support the freedoms of the consumers?
It should just support freedom in consumption, whatever that means. No, I don’t think one can say that choice on the part of consumers outweight choice on the part of producers, but rather that consolodated economic power in the hands of someone not really checked by any other power is a recipe for disaster—which is not to say it is a disaster, or that it must become one, only that it is quite prone to producing problems as well as products.
A market should be as free as the men allowed to interact in it, since a market is more or less a manifestation of worldly desire. A market can be more free than men, which allows abuses of economic power. A market can be less free than men, which allows for domination of them via their economic behavior.
erislover
I’m still feeling like this “free market” thing is pretty nebulous. You say it should have some sort of framework, but it’s hard for me to determine what that is.
You say that
but it’s not clear to me at all how you might propose the two freedoms can be equated. It seems to have meaning, but it’s also pretty vague.
So far, in effect, it just seems like “I like some controls but not others.” Some more specifics that could make a consistent viewpoint apparent would be appreciated.
A market is ‘free’ when producers and sellers are allowed to sell the goods they want to sell, and set their own prices. If those prices don’t overlap, goods will not be exchanged.
The free market is a VERY good thing. It is the natural, rational way for people to interact with each other. It is the most efficient way to organize a society. It respects the freedom of individuals to expend their own labor in the fashion they desire.
And it’s not anarchy. Producers are free to set prices wherever they want, but if they don’t match the price consumers are willing to pay, they won’t sell anything. So both sides wind up negotiating to find a fair price that will allow commerce.
The free market is itself a strong regulator of behaviour. Think about it - probably 90% of all the transactions in North America are completely free, or close to it. Yet, people seem to find what they want, employment is full, and happiness levels are high.
Does this mean the market is perfect? No. Clearly there is need for some regulation, especially when it comes to things like external costs of transactions. In other words, if I want a tree on my property removed because it obscures my view of the lake, and you offer to burn it down, the guy living downwind of the smoke should have a say and often doesn’t. So some regulation of externalities is a reasonable limitation on free markets.
However, the ‘flaws’ of the free market are vastly overblown by socialists and other opponents of free exchange. Take the example of monopolies. Many people seem to have this belief that markets naturally tend towards consolidation and monopoly. In fact, there is little evidence that there is a force pushing industries towards monopoly. Most monopolies that have existed in the last 100 years have done so through government interference. For example, giving rights-of-way to solitary companies, land grants to railroads, AT&T before the breakup, television and radio stations, etc. In exchange for being granted monopoly rights, these corporations agree to heavier-than-normal regulation.
But absent the protection of government, monopolies almost NEVER arise, and of those that do, it’s usually because the ‘monopolistic’ company is simply much better than its competitors at providing what consumers want.
My position on free markets is that they have proven themselves to be the best way we have come up with for organizing the economic activity of society. Therefore, any intrusions into the free market should bear the burden of proof that they are A) needed, and B) the best way to fix the perceived problem. And this should be a HIGH standard of proof, and not just because a few people march on Washington with various complaints or otherwise lobby politicians.
[QUOTE]
*Originally posted by Sam Stone *
A market is ‘free’ when producers and sellers are allowed to sell the goods they want to sell, and set their own prices. If those prices don’t overlap, goods will not be exchanged.
[QUOTE]
A little confused here, did you mean producers and buyers?
You also made a number of claims I find questionable, but I’ll let that sit until we’ve established a little groundwork
So,IOW, you’re not really in favor of a free market? You’re actually just in favor of a market that’s regulated how you see fit?
I can’t let this one slide. Do you think the existence of anti-monopoly laws have had anything to do with this fact ?(assuming it is a fact)
cite please.
So… what constitutes being “needed”?
I apologize for the coding in my last post.
note that I wrote:"A little confused here, did you mean producers and buyers?
You also made a number of claims I find questionable, but I’ll let that sit until we’ve established a little groundwork"
in between the first two quotes of Sam Stone’s.
I am in favor of free markets, until they have proven themselves to be in need of regulation. Regulation should be the last resort.
As for proving that monopolies don’t naturally arise… Do you really need proof of this? Can’t you just look around you? Anti-trust laws are rarely invoked, you know, and often when they are they are found to be improper by the courts.
And no, I don’t think the mere existence of anti-trust laws prevent people from trying to monopolize, because A) it’s a rare company that can get to the position of monopoly power in the first place, and B) because the anti-trust laws are so vaguely worded and subjective that it is often almost impossible to tell beforehand whether or not a specific act would violate them.
The forces preventing companies from becoming monopolistic are obvious. First, markets are rarely monolithic, so there is almost always room for competitors to fill niches. These competitors often grow into threats. Second, the public does no like monopolies, and all else being equal will start to buy elsewhere. Check out the opposition to Microsoft for an example. Even corporations prefer to spread their purchases around to prevent themselves from being tied to any one producer.
Plus, being big becomes a disadvantage, because large corporations start to have the same flaws as large governments - entrenched bureaucracy, complexity, and inefficiency.
I can point to examples of this all day. Look at IBM. IBM has been a dominator in its marketplace three or four times now, and each time it lost significant market share to upstarts due to errors in management.
Perhaps you could provide some examples of companies that needed the government to break them up to protect the consumer?
Once again, what consitutes a need? What constitutes a proof?
Have sufficient needs and proofs already been provided in your opinion?
Sure. I haven’t seen this proof before, I’d like to know what it is. You’ve provided some common sense arguments, but data would be preferable.
It seems to me we wouldn’t have anti-trust laws unless we thought there was a problem to begin with.
I guess for you, naturally would mean without governmental assistance. Yet it seems to me that power afforded to large companies is through the government is a natural extension of their economic power that the market has granted them. Either the companies use the government gain power or political interests use the government to break them up.
It means the burden of proof is on you. Make your case. It means not ASSUMING that a market needs to be regulated before showing any signs of problems.
Have sufficient needs and proofs been provided? For what? You need to be specific. It’s not all-or-nothing. There are tens of thousands of pages of regulations in the Federal Register. My guess is that probably 3/4 of them should be eliminated.
Feel free. Like I said, we live in a capitalist country, and the burden of proof should be on the people who want to muck with it. Show me a monopoly situation that arose without government interference, and which needed government interjection to eliminate it.
I’m not saying that it’s impossible to monopolize. There ARE cases of anti-competitive practices and price fixing. The question is whether or not this is the natural direction of evolution of markets, and how much regulation is necessary to stop it. I would argue that markets do NOT evolve towards monopolies naturally, other than in in special cases where the downward slope of prices due to economies of scale can overwhelm the forces preventing companies from growing.
I would also point out that the trends in most markets is towards diversity. Look at the retail market - it used to be dominated by department stores like Sears. Now there are no retailers who hold significant market share, because there is so much competition. And I don’t know of anti-trust laws playing a part in this - it’s just the natural evolution of the marketplace. The same can be said for grocery stores, video rentals, car companies (The “Big Three” is now what, the “Big 8”?), transportation, etc. Markets are generally competitive. As a result, I believe they evolve AWAY from monopolies, and not towards them.
There may be the rare case where a company for some reason manages to control a market to the point where it is non-competitive (defined as the point at which they can set their own prices, and not respond to market prices). Frankly, I can’t think of a case, other than technical monopolies like DeBeers diamonds. Perhaps you could provide some examples.
That’s a lousy way to detemine if a law is correct. Should we have dairy subsidies? Someone obviously thought they were a good idea. How about a wool-and-mohair subsidy? Or subsidizing water so people can grow rice in California? Are those good things?
I don’t understand what you are saying here. Power afforded to large companies is though the government? How so? You’ll have to give me some examples.
It is true that companies often use the power of government to further their own interests. This is an argument against government, not against big companies.
I heard what you said about the burden of proof, but I still have no idea what you consider needed.
I was asking you to provide a few examples so I could understand what you’re talking about.
So conversely could you estimate that 1/4 of the regulations are probably necessary? So are you in favor of regulation instead of a free market or aren’t you?
If some regulations, for some reason, don’t hinder the free market please tell me what this reason is.
Did I say I wanted to muck with it? I asked you to back up your assertions. If you can’t back them up that’s fine, but you don’t have to pretend it’s someone else’s burden to prove you wrong.
It’s just an inclination, for lack of a solid proof either way. You still haven’t provided one for me. But that’s ok. We can leave that for another thread.
It’s a fact not an argument. But I guess you’re saying that keeping government from regulating the market would keep concentrations of wealth from being able to use the government from being able to create competive disadvantages.
But there are many ways of doing this that aren’t necessarily regulation per se. Taxation for instance, could favor larger companies over smaller ones. Unless of course you argue that taxes inhibit the free market. Are you in favor of no taxes?
I’m not sure what you’re asking? Are you under the impression that ‘the market’ is an entity to either be regulated or unregulated? “The Market” is nothing more than the collective transactions of a whole lot of people. So if you want to know if some transactions should be regulated, sure.
It’s also not an all-or-nothing proposition. No one except for the most radical anarchists would say that there should be NO regulation in the market.
If you want some specific examples, I already offered them - areas where there are significant externalities to transactions. For instance, I don’t have a problem with reasonable anti-pollution regulation, or with taxes that are used to correct for externalities.
There are also markets in which there are natural barriers to competition because of limits to resources. Bandwidth for transmissions, harbors, etc. These ‘public resources’ are scarce and not everyone can have access to them. So I think there is a need to regulate them.
We haven’t even talked about the most powerful regulating force, which is tort law. And I’m fully in favor of people being able to sue companies that provide shoddy products. This ability leads to insurance, which leads to regulation of the industry by insurance companies. Go try to find a household appliance that isn’t UL approved, for example. It’s difficult, even though there is no law demanding UL approval.
I am a great believer and defender of freedom and liberty in general, abstract, terms and I believe the freedom to buy and sell, is an essential part of this. Personal freedom requires economic freedom. Economic freedom requires and implies the freedom to own property and to trade. Many who are in favor of regulating commerce build straw men and then demolish them (so it’s OK to pollute?). So, before anyone does that I will answer that preemptively. A free market does not mean a lawless market any more than a free society means a lawless society. The function of the state is to create a framework where we can enjoy freedom of choice in our daily lives and in our commerce. To that end the state creates a framework of laws which, on the one hand, restrict our freedom but, on the other, enhance other’s freedom. The only reason to restrict a person’s freedom is if it protects other people’s freedom (the proverbial “your right to stretch your fist out ends where my nose begins”). Hayek, in The Road to Serfdom explains all this very well. The following quotes are all taken from The Road to Serfdom.
But, where competition can be implemented it is the best system for satisfying the most people to the highest degree and giving them the highest degree of choice and of freedom. Nobody can tell better than me how much a product or service is worth to me. If I cannot find a person willing to deliver at that price, it means others have deemed it more valuable. If A is unwilling to do it for the price I offer I can try to find someone else who will do it. A free market is a competitive market. Free competition is of the essence of a free market. This principle of the free market prices being the best system for the allocation of resources is explained in The Use of Knowledge in Society, also by Hayek.
So what effect do laws and regulations have on the freedom of the markets? Which things should be subject to the free market and what things should be restricted? As has been said above, there are certain things which cannot be effectively subject to the free market. Let us look at some examples.
There are services which are services to the community as a whole and cannot be bought by the individual individually. The army which a country should have is a service for the entire country and different individuals cannot choose to have different levels of defense. In this case it is clear that a national decision needs to be reached at the government level. If the government is democratically elected then it should be able to reach a decision which is acceptable to the majority of the population.
There is no practical way for the use of roads to be directly paid by the users as it would have meant a huge cost in toll collection and other expenses. Also, in most cases, it is not feasible to have several roads, side by side, serving the same route and competing with each other. The only practical way is for the government to build the roads and charge the users through a gasoline tax or the general public through a general tax. A gasoline tax is better in that the burden rests more directly on the users of the service.
Clearly, these are services which cannot be bought individually cannot be therefore provided and bought individually. But products and services which can be bought and sold individually will gain from free competition.
Now, what kinds of regulations are admissible? Laws and regulations which are of a general nature and do not intend directly to have the effect of altering prices or quantities or inducing people to alter their behavior in the market. These laws and regulations may have these effects indirectly and inevitably, but it should not be their purpose. Let us look at some examples:
Suppose the government establishes a tax on CO2 emissions with the intention of encouraging a reduction in these emissions. Nothing wrong with that. The intention is to reduce overall emissions of CO2 which the government has determined to be a desirable goal. It is impossible to charge the individual or the corporation individually for their emissions so a tax on fuels and other pollutants is justified.
Such a general law may well have the effect of people consuming less fuel and using the money for something else but it affects everybody equally across the board. What would not be acceptable is a different tax rate depending on the use . For example, tax only fuel used for recreation but not for industrial uses like the US started doing a few years back with boat fuel. This means the government has decided to favor certain activities (commercial fishing) in detriment of other activities (recreational fishing). This is a distortion of the market which leads to inefficiency and loss of freedom. It has the effect of discriminating one person and activity in favor of another person and activity. What you pay for fuel should not depend on what you will use the fuel for unless there is a differentiating factor which justifies it.
If I can prove that fuel used by boats ends up polluting more than the same fuel if used by cars, then it would be acceptable to tax them differently. But the fact that recreational boats pay a tax of which commercial boats are exempt means only that the government has decided they can get away with taxing one group and not the other. This has the direct and primary effect of making encouraging certain activities over certain other activities. Not acceptable.
So, general laws, setting up obligations and restrictions which affect everyone equally, which are not discriminatory in nature and which are based on a general social need, are perfectly acceptable. Laws prohibiting children work, or polluting or requiring safety measures, they are all fine if they apply across the board and their intention is not to distort the market. Laws should be general in nature and be concerned only with the social need they need to address and the social need can never be to favor one group over another
A law restricting pollution runoff by farms may have different effects on different types of farms but the objective is to limit pollution which is a social need and the secondary effect is not intended. But a law setting different conditions for chicken farmers than for pig farmers means they are favoring one thing over the other which distorts the market. Farm subsidies are an abomination as they favor certain activities over others.
I want more than examples I want a rationale supported and explained by examples. How would I distuinguish (without being told specifically) which regulations you considered as having “significant externalities” and which ones don’t?
You have put yourself forward as a proponent of the “free market”, yet you tell me it should be regulated. So what’s so free about your ideal market? How do you distinguish it from a market that’s not free?
Is there any resource that isn’t limited? There’s only so much mass and energy on this planet. Everything has it’s limits. There’s only so much land, so much oil, so much gold etc…
Please be more specific.
Although one can find many flaws in a free market, regulation is always dangerous. Regulation may work against the public interest for a number of reasons:[ul][li]Regulators may like to regulate[]Regulators may be seeking personal power.[]Regulators may be incompetent[]They may be poloitically motivated[]They may use their power to aid particular people or customers. In fact, companies like Enron make it a practice to be popular with powerful government figures.[/li][/quote]
[]Regulations are hard to reverse. Regulations that no longer have value tend to stay on the books.[]The growing number of regulations can reach a point where nobody knows them all. This is the case, today, where the number of pages are in the millions.Actual history has shown that free markets have been far more successfulo governmnet-controlled ones.[/ul]
Sigh. Just read Sailor’s message. He said it just about perfectly.
And why do I get the feeling you’re trying to lay some kind of trap? Every time I outline a principle, you want me to be ‘more specific’, or offer examples and proofs. When I gave you examples of radio broadcasts and harbors, you bring up energy and mass in general?
With many of these things, there are no bright lines or hard and fast rules that you can apply. That’s why we have laws and courts and elected officials and all the rest. For example, you ask me what constitutes a ‘significant’ externality that warrants regulation. That’s up to the government to decide, but I will not support a government that goes overboard with this. Blowing thick smoke into my neighbors yard even though he asked me to stop is a significant externality. Exhaling CO2 in his vicinity isn’t, even though both are pollutants. The exact point at which regulation is needed is fuzzy, which is why we debate it and elect people whose judgement we trust. If we could just refer to the giant book O’ regulation and come up with a hard answer, we could run the country with computers.
The difference between most small-l libertarians and those who support more regulation isn’t that one group refuses to believe that any regulation is necessary and the other group believes that everything should be regulated - the difference is simply where each group draws the line, and what remedies they propose. They draw the lines in different places because they have differing beliefs about the value of the marketplace and the dangers and efficiency of government interference. For example, you seem to be inordinately concerned with out-of-control monopoly power. I am inordinately concerned with out-of-control government power. This will necessarily skew our positions. However, I think history is on my side. Governments have proven themselves to be far more dangerous than unregulated corporations.
You seem to be looking for absolutes. In economics, they rarely exist.
So when does regulated “free” market turn into a “governmnet-controlled (sic)” market? Why?
Regulation and deregulation are both tools, not ideologies.
-Ulterior
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So when does regulated “free” market turn into a “governmnet-controlled (sic)” market? Why?
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Let’s say you have an apple and a knife. Cut a small sliver off the apple. Is it still an apple? I suppose. Cut another one off. Still an apple? Repeat.
At some point you’ll have to say that what you have left in your hand is no longer an apple. At some point, it stopped being an apple, and became a piece of an apple. But it would be impossible to point at the exact cut that caused it to change from apple to non-apple.
That’s ‘fuzzy’ information. And that’s the situation with markets. You can’t point to any specific piece of regulatory law and say, “That is what caused our markets to stop being ‘free’”.
Another response might be that markets stop being ‘free’ when the preponderance of transactions are regulated. Yet another might be when the cost of regulation exceeds a certain percentage, or when the tax burden reaches a certain point. But none of those answers are definitive. That’s the real world.