A free market is one untrammeled by the state. Some maintain that a free market includes state control to enforce contracts, property rights and to provide military protection; others would maintain that even these areas are best left to the market itself to be resolved through negotiation between those directly involved.
A free market is surely an unregulated one in which those who participate do so without state coercion and rely on enlightened self-interest to create the transaction. In a regulated society, those involved with the state simply assume that the state itself has an affirmative obligation to compensate for market failures. Strangely, these market failures tend to expand over time with those responsible for legislation finding more and more market failures as the state evolves. In a free-market system there are no, or very few, market failures.
A free-market system relies on market inputs themselves to create a transactional environment that is conducive to proper functioning. The main purpose of such an environment is price discovery. The freer the market, the less trammeled by the force of state regulatory functions, the more accurate the price discovery is likely to be. While there is in actuality no such thing as a "perfect" market, one could argue that every market is in a sense perfect because it contains all the information available at a given time to the parties involved.
We can see from this description that a market is (theoretically) always perfect (the result of at least two parties meeting together to perform a transaction) but such markets are never "fair," nor can they be. One party may surely have an informational advantage over the other, even if it is only slight. The advantage of such a market however, is that both parties are entering into the transaction voluntarily. Thus, they are far more apt to live with the result than in a situation where coercion is part of the process or where one party or the other feels protected by certain statist stipulations (regulations), which later prove ineffective.
There is no reason why a free-market system of transactions could not take the place of the current regulatory democracy. There is nothing theoretically that the free market cannot do with equivalent competence to a regulated market. In fact, free-market proponents would argue that since regulatory democracies have in large part dispensed with the Invisible Hand of competition, regulated markets are inevitably less efficient than private markets.
There is no doubt that markets were less constrained 100 or 200 years ago than they are now. There is also no doubt that even despite technological advances the current economic and monetary system is not working very well. It will be replaced sooner or later, and hopefully by an environment that is more – not less – sympathetic to free markets and their efficient results.