We have talked a lot about markets but we never quite defined them. At its most basic, markets are simply a group of people exchanging goods and services. Why should such a group have special and beneficial characteristics? This is what we are going to study today by introducing Mr. Free Market.
FREE MARKETS
Definition
Since the day humans started to study the economy, there has been a gigantic number of definitions, counter-definitions, qualifiers, exceptions, objections, criticisms and debate. In all likelihood, there aren’t two economists alive today that agree 100% on the exact definition of free market. Hence, in following with this proud tradition, we are going to provide our own definition.
A Free Market is a free market.
It sounds redundant, but it is not. What we mean by “free” is exactly that: free. Free from all external artificial influences targeted at modifying in any shape or form the market. It is the absence of anything created by humans which is designed to alter the markets but it has not originated in the market itself. Typically, we are referring to government pressures on prices and wages (i.e. taxes, subsidies, laws, government monopolies or imposition, etc.).
Sometimes this kind of free market is called a Laissez-faire market, from the French: let-it-do or let-it-be. But even this definition is too restrictive since it accepts government regulation to prevent coercion or theft. We do not. A Free Market is a free market. Period.
Modeling
In following with the idea that economics is a science (ok now, once you stop laughing, take a deep breath and let us know so we may continue…), economists create models. These models are idealized sets of rules that attempt to describe a phenomenon; in this case the Free Market.
We couldn’t care less. Actually, if you offer us about a million Swiss Francs, we may consider giving caring some consideration, but not for longer than 5 milliseconds…. which is too long anyway.
We could not care less about the theoretical implications of a theoretical free market model and its theoretical conditions simply because a free market is not a theoretical thing. Free markets existed throughout the world until such time when governments started to interfere. Hence, we don’t have to imagine what a Free Market would look like, because we already know from history! There is no need for a theoretical model of free markets, because we have an actual reality. We do not need to assume anything; all we need to do is to look.
Why study Free Markets?
Because of one simple reason: they work; not only that, they worked better than anything else ever since. Seems trivial, stupid also, but it is the best answer one could possible hope to achieve. Ever.
Ask any engineer. Finding something that actually works, is tough. Finding something that works consistently, and it consistently beats any other system, is almost impossible to find, almost a miracle.
So here we are. Staring at a miracle in its face and tampering and distorting it in order to “improve” it. Yes, it is as stupid as it sounds. Always remember the first rule of engineering: if it works, don’t screw with it!
It is because of this reason, the fact that free markets work better than anything else, that we choose them as our ideal markets. Doing otherwise would brand us incredibly stupid and with good reason.
We want to know everything that there is to know about them, because we are honest but we are also not stupid. We need to defend our ideas from other people and other ideas.
Because we are honest, we are always looking for something better than the free markets. The second we find it, we will switch to it. We have no allegiance to free markets or any other market theory or system other than demanding that they work better than anything else. Alas, we have not find it yet. Therefore and for now, we demand free markets.
We need to know as much as possible about free markets because by comparing them with other market theories and systems, we are able to determine if they can overtake the free market. It is the only way.
We also need to know as much as possible so that we may defend free markets when warranted. Some economists are honest, strange that this concept may sound. They will provide objections and issues with free markets. We need to be in the position to determine their validity. We can only do so if we know free markets.
And lastly, we need to know free markets because the rest of the people in the “economic profession” are not honest. They are biased and interested in pursuing their own interests at any cost. They will present false arguments and erroneous conclusions on purpose. We need to stand ready to debunk them.
Note: please see the Glossary if you are unfamiliar with certain words.
Continue to Introducing Mr Free Market - Part 2
