“Free market” does not mean unregulated

“Free market” does not mean unregulated.

The extent of a free market is in the freedom of the participants to participate in it.  No one who knows what they are talking about uses this term to mean a market free from oversight at some or any level.

A free market is one in which one person offers a good or service for exchange and anyone who wishes to may make that exchange with them.  That’s all there is to it.

There are implications for what proper regulation is in a free market.  A truly free market doesn’t have regulations that exclude or restrict participation in the market, absent a truly compelling public interest.  Restricting the sale of alcohol to minors is one that most persons not between 18 and 21 seem to agree on, for example.

Adam Smith is frequently derided, usually by those who don’t understand it, for his idea of the invisible hand, and then those people chuck out the rest of what he had to say because that one bit didn’t make sense to them.  One of the things he said, though, that is subsequently lost, is that a free market cannot be an unregulated market.  He warned that markets with no controls would tend toward the rise of monopolies, which is a symptom, then, of an unfree market.  What’s more, in a properly functioning free market, neither party is coerced into an exchange–you need enforcement to prevent that–and there can be no fraud involved–again a need for enforcement, and for investigation.

Free markets require regulation.

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