Free market

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A free market is a term in economics that refers to an economy operating with little to no interference on the part of a government. The central pillar of free market economy is voluntary exchanges without the use of any kind of coercion or violence.[1] This type of economic philosophy is the backbone to the system of capitalism, and is sometimes referred to by the French phrase "laissez-faire," meaning to "let be." Free markets are largely dependent on the process of supply and demand, where prices are determined by the amount of the product in the market, as well as the number of consumers who wish to purchase that product. The market will punish business whose practices are not beneficial, as consumers will take their business elsewhere. Communism and socialism are the antithesis of the free market.

The opposite of a free market is a command system, in which the government regulates all businesses for the theoretical central planning of the economy, although this has been shown to have negative effects. Economist Friedrich Hayek warned however of mixing a planned economy with a competitive economy, "a mixture of the two means that neither will work." [2]

A mixed economy contains both private-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and command economy. For example, the UK is said to have a free market economy in almost all goods and services but retains a bureaucratic socialised healthcare regime. This is justified on the grounds that it will ensure that British subjects have access to health care which is supported out of state coffers.

Libertarian economist Milton Friedman said,

The most important single central fact about a free market is that no exchange takes place unless both parties benefit. [1]

See also

External links

References

  1. Free Market, Concise Encyclopedia of Economics
  2. Friedrich A. Hayek, Road to Serfdom, Reader's Digest Condensed Version, April 1945, pg. 38.
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