Free Market Thinking
Free-market thinking deals with the social arrangements that arise in the absence of coercion by means of violence or the threat of violence. Because governments typically maintain a near-monopoly over such coercion, much free-market analysis focuses on the role and effects of government activity.
The free-market school of thought covers topics in ethics and topics in economic efficiency.
Ethics of the Free Market
The ethical touchstone of free-market thinking is consent. Activities universally treated as crimes, such as robbery, burglary, embezzlement, assault, battery, rape and murder, are unethical because they are done without the consent of the target. Free-market thinkers generally regard fraud as unethical because it operates by subverting the target's ability to consent. From the free-market point of view, it is the lack of consent, not the fact that such activities are prohibited by government, that renders them unethical.
Conversely, any transaction based on consent is presumably legitimate, even if governments have declared it illegal. Thus free-market thinking dismisses any ethical arguments for measures such as government-imposed price controls, rationing, mandatory professional licensing, securities market regulation and product standards enforced by penalties. Such measures are seen as morally obtuse because they involve a third party (government) intervening with a threat of force to prevent transactions to which buyer and seller consent.
Carried to its logical extreme, the ethical dimension of free-market thinking leaves little room for modern government. If ethical transactions require the consent of the parties, no transaction that requires the coercive force of government can be ethical. The only exception allowed by this position is government action to protect the public from coercion – police activity to suppress violent crime and military activity to protect against coercion by other governments.
Some free-market thinkers stop short of this extreme conclusion regarding the role of government by invoking the interests of persons considered incapable of giving consent, such as children, imbeciles and the deranged and unconscious.
The central economic conclusion of free-market thinking is that markets unregulated by government will foster the efficient use of human wealth, and that regulation or other interference with free markets tends to impoverish society. This conclusion is reached by a variety of arguments.
Self-interest. No two or more parties will consent to a transaction unless it leaves every one of them better off. And no two or more parties will refuse a transaction that leaves all of them better off. Thus an unregulated free market will exhaust the possibilities for mutually beneficial transactions that are available at any moment, leaving nothing to be achieved by government regulation that doesn't leave someone less well off.
Opportunity. If there exists an opportunity for a mutually beneficial transaction that the parties have failed to recognize, a third party that identifies the opportunity can profit by exploiting the opportunity in the capacity of broker, deal-maker, market-maker or arbitrager. Thus there is no need for government to bring the parties together to prevent the opportunity from going to waste. Further, discovering such unexploited opportunities requires specialized skills; and there is no reason to expect participants in government to be exceptional in possessing such skills.
Government self-interest. Government action is never action by government per se but action by particular individuals exercising state power. Such individuals will normally act in their own interest. Even if the free market did neglect transactions that were mutually beneficial, it would be wishful thinking to rely on individuals exercising state power to cure that neglect.
Social comparison. Societies in which government is small (as measured by the share of national income taken in taxes and by the portion of the population employed by government) tend to be wealthier than societies in which government is the dominant economic actor.
Historical comparison. Rates of economic growth tend to accelerate when a society's government changes from a regime of regulation to a regime of free markets.
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