Free market

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In economics, a free market is a system in which the prices for goods and services are self-regulated by the open market and by consumers. In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority and from all forms of economic privilege, monopolies and artificial scarcities. [1] Proponents of the concept of free market contrast it with a regulated market in which a government intervenes in supply and demand through various methods such as tariffs used to restrict trade and to protect the local economy. In an idealized free-market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.

Economics is the social science that studies the production, distribution, and consumption of goods and services.

Economic system system of production and exchange

An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entities, decision-making processes and patterns of consumption that comprise the economic structure of a given community. As such, an economic system is a type of social system. The mode of production is a related concept. All economic systems have three basic questions to ask: what to produce, how to produce and in what quantities and who receives the output of production.

Price quantity of payment or compensation given by one party to another in return for goods or services

A price is the quantity of payment or compensation given by one party to another in return for one unit of goods or services. A price is influenced by both production costs and demand for the product. A price may be determined by a monopolist or may be imposed on the firm by market conditions.

Contents

Scholars contrast the concept of a free market with the concept of a coordinated market in fields of study such as political economy, new institutional economics, economic sociology and political science. All of these fields emphasize the importance in currently existing market systems of rule-making institutions external to the simple forces of supply and demand which create space for those forces to operate to control productive output and distribution. Although free markets are commonly associated with capitalism within a market economy in contemporary usage and popular culture, free markets have also been advocated by anarchists, socialists and some proponents of cooperatives and advocates of profit sharing. [2] Criticism of the theoretical concept may regard systems with significant market power, inequality of bargaining power, or information asymmetry as less than free, with regulation being necessary to control those imbalances in order to allow markets to function more efficiently as well as produce more desirable social outcomes.

Political economy Study of production, buying, and selling, and their relations with law, custom, and government

Political economy is the study of production and trade and their relations with law, custom and government; and with the distribution of national income and wealth. As a discipline, political economy originated in moral philosophy, in the 18th century, to explore the administration of states' wealth, with "political" signifying the Greek word polity and "economy" signifying the Greek word "okonomie". The earliest works of political economy are usually attributed to the British scholars Adam Smith, Thomas Malthus, and David Ricardo, although they were preceded by the work of the French physiocrats, such as François Quesnay (1694–1774) and Anne-Robert-Jacques Turgot (1727–1781).

New institutional economics (NIE) is an economic perspective that attempts to extend economics by focusing on the social and legal norms and rules that underlie economic activity and with analysis beyond earlier institutional economics and neoclassical economics. It can be seen as a broadening step to include aspects excluded in neoclassical economics. It rediscovers aspects of classical political economy.

Economic sociology Study of the social cause and effect of various economic phenomena

Economic sociology is the study of the social cause and effect of various economic phenomena. The field can be broadly divided into a classical period and a contemporary one, known as "New economic sociology".

Economic systems

Laissez-faire economics

The laissez-faire principle expresses a preference for an absence of non-market pressures on prices and wages such as those from discriminatory government taxes, subsidies, tariffs, regulations of purely private behavior, or government-granted or coercive monopolies. In The Pure Theory of Capital, Friedrich Hayek argued that the goal is the preservation of the unique information contained in the price itself. [3]

A tax is a compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes consist of direct or indirect taxes and may be paid in money or as its labour equivalent. The first known taxation took place in Ancient Egypt around 3000–2800 BC.

A subsidy or government incentive is a form of financial aid or support extended to an economic sector generally with the aim of promoting economic and social policy. Although commonly extended from government, the term subsidy can relate to any type of support – for example from NGOs or as implicit subsidies. Subsidies come in various forms including: direct and indirect.

A tariff is a tax on imports or exports between sovereign states. It is a form of regulation of foreign trade and a policy that taxes foreign products to encourage or safeguard domestic industry. Traditionally, states have used them as a source of income. Now, they are among the most widely used instruments of protectionism, along with import and export quotas.

The definition of free market has been disputed and made complex by collectivist political philosophers and socialist economic ideas. [1] This contention arose from the divergence from classical economists such as Richard Cantillon, Adam Smith, David Ricardo and Thomas Robert Malthus and from the continental economic science developed primarily by the Spanish scholastic and French classical economists, including Anne-Robert-Jacques Turgot, Baron de Laune, Jean-Baptiste Say and Frédéric Bastiat. During the marginal revolution, subjective value theory was rediscovered. [4]

Classical economics or classical political economy is a school of thought in economics that flourished, primarily in Britain, in the late 18th and early-to-mid 19th century. Its main thinkers are held to be Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Robert Malthus, and John Stuart Mill. These economists produced a theory of market economies as largely self-regulating systems, governed by natural laws of production and exchange.

Richard Cantillon Irish-French economist and banker

Richard Cantillon was an Irish-French economist and author of Essai sur la Nature du Commerce en Général, a book considered by William Stanley Jevons to be the "cradle of political economy". Although little information exists on Cantillon's life, it is known that he became a successful banker and merchant at an early age. His success was largely derived from the political and business connections he made through his family and through an early employer, James Brydges. During the late 1710s and early 1720s, Cantillon speculated in, and later helped fund, John Law's Mississippi Company, from which he acquired great wealth. However, his success came at a cost to his debtors, who pursued him with lawsuits, criminal charges, and even murder plots until his death in 1734.

Adam Smith 18th-century Scottish moral philosopher and political economist

Adam Smith was a Scottish economist, philosopher and author as well as a moral philosopher, a pioneer of political economy and a key figure during the Scottish Enlightenment, also known as ''The Father of Economics'' or ''The Father of Capitalism''. Smith wrote two classic works, The Theory of Moral Sentiments (1759) and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The latter, often abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics. In his work, Adam Smith introduced his theory of absolute advantage.

Although laissez-faire has been commonly associated with capitalism, there is a similar economic theory associated with socialism called left-wing or socialist laissez-faire, or free-market anarchism, also known as free-market anti-capitalism and free-market socialism to distinguish it from laissez-faire capitalism. [5] [6] [7] Critics of laissez-faire as commonly understood argue that a truly laissez-faire system would be anti-capitalist and socialist. [8] [9]

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system and competitive markets. In a capitalist market economy, decision-making and investments are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.

Socialism is a range of economic and social systems characterised by social ownership of the means of production and workers' self-management, as well as the political theories and movements associated with them. Social ownership can be public, collective or cooperative ownership, or citizen ownership of equity. There are many varieties of socialism and there is no single definition encapsulating all of them, with social ownership being the common element shared by its various forms.

Free-market anarchism, also known as free-market anti-capitalism and free-market socialism, is the branch of anarchism that advocates a free-market economic system based on voluntary interactions without the involvement of the state. A form of individualist anarchism, left-libertarianism and libertarian socialism, it is based on the economic theories of mutualism and 19th-century American individualist anarchism. Left-wing market anarchism is a modern branch of free-market anarchism that is based on a revival of such free-market anarchist theories. It is mainly associated with American mutualists and left-libertarians such as Kevin Carson and Gary Chartier, who consider themselves anti-capitalists and identify as part of the socialist movement.

Socialist economics

Various forms of socialism based on free markets have existed since the 19th century. Early notable socialist proponents of free markets include Pierre-Joseph Proudhon, Benjamin Tucker and the Ricardian socialists. These economists believed that genuinely free markets and voluntary exchange could not exist within the exploitative conditions of capitalism. These proposals ranged from various forms of worker cooperatives operating in a free-market economy such as the mutualist system proposed by Proudhon, to state-owned enterprises operating in unregulated and open markets. These models of socialism are not to be confused with other forms of market socialism (e.g. the Lange model) where publicly owned enterprises are coordinated by various degrees of economic planning, or where capital good prices are determined through marginal cost pricing.

Pierre-Joseph Proudhon French politician, mutualist philosopher, economist, and socialist

Pierre-Joseph Proudhon was a French politician and the founder of mutualist philosophy. He was the first person to declare himself an anarchist, using that term and is widely regarded as one of the ideology's most influential theorists. Proudhon is even considered by many to be the "father of anarchism". He became a member of the French Parliament after the Revolution of 1848, whereafter he referred to himself as a federalist.

Benjamin Tucker American journalist and anarchist

Benjamin Ricketson Tucker was an American 19th-century proponent of individualist anarchism which he called "unterrified Jeffersonianism" and editor and publisher of the American individualist anarchist periodical Liberty.

Voluntary exchange is the act of buyers and sellers freely and willingly engaging in market transactions. Moreover, transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred.

Advocates of free-market socialism such as Jaroslav Vanek argue that genuinely free markets are not possible under conditions of private ownership of productive property. Instead, he contends that the class differences and inequalities in income and power that result from private ownership enable the interests of the dominant class to skew the market to their favor, either in the form of monopoly and market power, or by utilizing their wealth and resources to legislate government policies that benefit their specific business interests. [10] Additionally, Vanek states that workers in a socialist economy based on cooperative and self-managed enterprises have stronger incentives to maximize productivity because they would receive a share of the profits (based on the overall performance of their enterprise) in addition to receiving their fixed wage or salary.

Socialists also assert that free-market capitalism leads to an excessively skewed distribution of income which in turn leads to social instability. As a result, corrective measures in the form of social welfare, re-distributive taxation and administrative costs are required, but they end up being paid into workers hands who spend and help the economy to run. They claim corporate monopolies run rampant in free markets, with endless agency over the consumer. Thus, free-market socialism desires government regulation of markets to prevent social instability, although at the cost of taxpayer dollars. [11]

Georgist economics

For classical economists such as Adam Smith, the term free market does not necessarily refer to a market free from government interference, but rather free from all forms of economic privilege, monopolies and artificial scarcities. [1] This implies that economic rents, i.e. profits generated from a lack of perfect competition, must be reduced or eliminated as much as possible through free competition.

Economic theory suggests the returns to land and other natural resources are economic rents that cannot be reduced in such a way because of their perfect inelastic supply. [12] Some economic thinkers emphasize the need to share those rents as an essential requirement for a well functioning market. It is suggested this would both eliminate the need for regular taxes that have a negative effect on trade (see deadweight loss) as well as release land and resources that are speculated upon or monopolised. Two features that improve the competition and free market mechanisms. Winston Churchill supported this view by the following statement: "Land is the mother of all monopoly". [13] The American economist and social philosopher Henry George, the most famous proponent of this thesis, wanted to accomplish this through a high land value tax that replaces all other taxes. [14] Followers of his ideas are often called Georgists or geoists and geolibertarians.

Léon Walras, one of the founders of the neoclassical economics who helped formulate the general equilibrium theory, had a very similar view. He argued that free competition could only be realized under conditions of state ownership of natural resources and land. Additionally, income taxes could be eliminated because the state would receive income to finance public services through owning such resources and enterprises. [15]

Non-laissez-faire capitalist systems

The stronger incentives to maximize productivity that Vanek conceives as possible in a socialist economy based on cooperative and self-managed enterprises might be accomplished in a capitalistic free-market if employee-owned companies were the norm as envisioned by various thinkers including Louis O. Kelso and James S. Albus.

Concepts

Perfect competition and market failure

Conditions that must exist for unregulated markets to behave as free markets are summarized at perfect competition. An absence of any of these perfect competition ideal conditions is a market failure. Most schools of economics[ which? ] allow that regulatory intervention may provide a substitute force to counter a market failure. Under this thinking, this form of market regulation may be better than an unregulated market at providing a free market.

Supply and demand

Demand for an item (such as goods or services) refers to the economic market pressure from people trying to buy it. Buyers have a maximum price they are willing to pay and sellers have a minimum price they are willing to offer their product. The point at which the supply and demand curves meet is the equilibrium price of the good and quantity demanded. Sellers willing to offer their goods at a lower price than the equilibrium price receive the difference as producer surplus. Buyers willing to pay for goods at a higher price than the equilibrium price receive the difference as consumer surplus. [16]

The model is commonly applied to wages in the market for labor. The typical roles of supplier and consumer are reversed. The suppliers are individuals, who try to sell (supply) their labor for the highest price. The consumers are businesses, which try to buy (demand) the type of labor they need at the lowest price. As more people offer their labor in that market, the equilibrium wage decreases and the equilibrium level of employment increases as the supply curve shifts to the right. The opposite happens if fewer people offer their wages in the market as the supply curve shifts to the left. [16]

In a free market, individuals and firms taking part in these transactions have the liberty to enter, leave and participate in the market as they so choose. Prices and quantities are allowed to adjust according to economic conditions in order to reach equilibrium and properly allocate resources. However, in many countries around the world governments seek to intervene in the free market in order to achieve certain social or political agendas. [17] Governments may attempt to create social equality or equality of outcome by intervening in the market through actions such as imposing a minimum wage (price floor) or erecting price controls (price ceiling). Other lesser-known goals are also pursued, such as in the United States, where the federal government subsidizes owners of fertile land to not grow crops in order to prevent the supply curve from further shifting to the right and decreasing the equilibrium price. This is done under the justification of maintaining farmers' profits; due to the relative inelasticity of demand for crops, increased supply would lower the price but not significantly increase quantity demanded, thus placing pressure on farmers to exit the market. [18] Those interventions are often done in the name of maintaining basic assumptions of free markets such as the idea that the costs of production must be included in the price of goods. Pollution and depletion costs are sometimes not included in the cost of production (a manufacturer that withdraws water at one location then discharges it polluted downstream, avoiding the cost of treating the water), therefore governments may opt to impose regulations in an attempt to try to internalize all of the cost of production and ultimately include them in the price of the goods.

Advocates of the free market contend that government intervention hampers economic growth by disrupting the natural allocation of resources according to supply and demand while critics of the free market contend that government intervention is sometimes necessary to protect a country's economy from better-developed and more influential economies, while providing the stability necessary for wise long-term investment. Milton Friedman pointed to failures of central planning, price controls and state-owned corporations, particularly in the Soviet Union and China [19] while Ha-Joon Chang cites the examples of post-war Japan and the growth of South Korea's steel industry. [20]

Economic equilibrium

Effects of price freedom FreePrice.JPG
Effects of price freedom

With varying degrees of mathematical rigor over time, the general equilibrium theory has demonstrated that under certain conditions of competition the law of supply and demand predominates in this ideal free and competitive market, influencing prices toward an equilibrium that balances the demands for the products against the supplies. [21] At these equilibrium prices, the market distributes the products to the purchasers according to each purchaser's preference or utility for each product and within the relative limits of each buyer's purchasing power. This result is described as market efficiency, or more specifically a Pareto optimum.

This equilibrating behavior of free markets requires certain assumptions about their agents—collectively known as perfect competition—which therefore cannot be results of the market that they create. Among these assumptions are several which are impossible to fully achieve in a real market, such as complete information, interchangeable goods and services and lack of market power. The question then is what approximations of these conditions guarantee approximations of market efficiency and which failures in competition generate overall market failures. Several Nobel Prizes in Economics have been awarded for analyses of market failures due to asymmetric information.

Low barriers to entry

A free market does not require the existence of competition, however it does require a framework that allows new market entrants. Hence, in the lack of coercive barriers, for example, paid licensing certification for certain services and businesses, competition between businesses flourishes all through the demands of consumers, or buyers. It often suggests the presence of the profit motive, although neither a profit motive or profit itself are necessary for a free market.[ citation needed ] All modern free markets are understood to include entrepreneurs, both individuals and businesses. Typically, a modern free-market economy would include other features such as a stock exchange and a financial services sector, but they do not define it.

Spontaneous order

Friedrich Hayek popularized the view that market economies promote spontaneous order which results in a better "allocation of societal resources than any design could achieve". [22] According to this view, market economies are characterized by the formation of complex transactional networks which produce and distribute goods and services throughout the economy. These networks are not designed, but they nevertheless emerge as a result of decentralized individual economic decisions. The idea of spontaneous order is an elaboration on the invisible hand proposed by Adam Smith in The Wealth of Nations . About the individual, Smith wrote:

By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. [23] [24]

Smith pointed out that one does not get one's dinner by appealing to the brother-love of the butcher, the farmer or the baker. Rather, one appeals to their self-interest and pays them for their labor, arguing:

It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. [25]

Supporters of this view claim that spontaneous order is superior to any order that does not allow individuals to make their own choices of what to produce, what to buy, what to sell and at what prices due to the number and complexity of the factors involved. They further believe that any attempt to implement central planning will result in more disorder, or a less efficient production and distribution of goods and services.

Critics such as political economist Karl Polanyi question whether a spontaneously ordered market can exist, completely free of distortions of political policy, claiming that even the ostensibly freest markets require a state to exercise coercive power in some areas, namely to enforce contracts, govern the formation of labor unions, spell out the rights and obligations of corporations, shape who has standing to bring legal actions and define what constitutes an unacceptable conflict of interest. [26]

General principles

The Heritage Foundation, a conservative and right-wing think tank based in Washington, D.C. that defines capitalism as the free market which is free from state intervention and government regulation, tried to identify the key factors necessary to measure the degree of freedom of economy of a particular country. In 1986, they introduced the Index of Economic Freedom which is based on some fifty variables. While this and other similar indices do not necessarily define a free market, The Heritage Foundation measures the degree to which a modern economy is free. The variables are divided into the following major groups:

According to The Heritage Foundation, these free market principles are what helped the United States transition to a free-market economy.[ citation needed ] International free trade improved the country and in order for Americans to prosper from a strong economy they had no choice but to embrace it. [27] Each group is assigned a numerical value between 1 and 5 as the index is the arithmetical mean of the values, rounded to the nearest hundredth. Initially, countries which were traditionally considered capitalistic received high ratings, but the method improved over time. Some economists such as Milton Friedman and other laissez-faire economists have argued that there is a direct relationship between economic growth and economic freedom and some studies suggest this is true. [28] Ongoing debates exist among scholars regarding methodological issues in empirical studies of the connection between economic freedom and economic growth. These debates and studies continue to explore just what that relationship entails. [29] [30] [31]

The Free Market Monument Foundation defines the principles of a free market as such: [32]

  1. Individual rights: "We are each created with equal individual rights to control and to defend our life, liberty and property and to voluntary contractual exchange."
  2. Limited government: "Governments are instituted only to secure individual rights, deriving their just powers from the consent of the governed."
  3. Equal justice under law: "Government must treat everyone equally; neither rewarding failure nor punishing success."
  4. Subsidiarity: "Government authority must reside at the lowest feasible level."
  5. Spontaneous order: "When individual rights are respected, unregulated competition will maximize economic benefit for society by providing the most goods and services possible at the lowest cost."
  6. Property rights: "Private ownership is the most efficient way to sustainably utilize resources."
  7. Golden rule: "Deal with others honestly and require honesty in return."

Criticism

Critics of the free market have argued that in real world situations it has proven to be susceptible to the development of price fixing monopolies. [33] Such reasoning has led to government intervention, e.g. the United States antitrust law.

Two prominent Canadian authors argue that government at times has to intervene to ensure competition in large and important industries. Naomi Klein illustrates this roughly in her work The Shock Doctrine and John Ralston Saul more humorously illustrates this through various examples in The Collapse of Globalism and the Reinvention of the World. [34] While its supporters argue that only a free market can create healthy competition and therefore more business and reasonable prices, opponents say that a free market in its purest form may result in the opposite. According to Klein and Ralston, the merging of companies into giant corporations or the privatization of government-run industry and national assets often result in monopolies or oligopolies requiring government intervention to force competition and reasonable prices. [34] Another form of market failure is speculation, where transactions are made to profit from short term fluctuation, rather from the intrinsic value of the companies or products. This criticism has been challenged by historians such as Lawrence Reed, who argued that monopolies have historically failed to form even in the absence of antitrust law. [35] This is because monopolies are inherently difficult to maintain as a company that tries to maintain its monopoly by buying out new competitors, for instance, is incentivizing newcomers to enter the market in hope of a buy-out.

American philosopher and author Cornel West has derisively termed what he perceives as dogmatic arguments for laissez-faire economic policies as free-market fundamentalism. West has contended that such mentality "trivializes the concern for public interest" and "makes money-driven, poll-obsessed elected officials deferential to corporate goals of profit – often at the cost of the common good". [36] American political philosopher Michael J. Sandel contends that in the last thirty years the United States has moved beyond just having a market economy and has become a market society where literally everything is for sale, including aspects of social and civic life such as education, access to justice and political influence. [37] The economic historian Karl Polanyi was highly critical of the idea of the market-based society in his book The Great Transformation , noting that any attempt at its creation would undermine human society and the common good. [38]

Critics of free market economics range from those who reject markets entirely in favour of a planned economy as advocated by various Marxists to those who wish to see market failures regulated to various degrees or supplemented by government interventions. Keynesians support market roles for government such as using fiscal policy for economic stimulus when actions in the private sector lead to sub-optimal economic outcomes of depressions or recessions. Business cycle is used by Keynesians to explain liquidity traps, by which underconsumption occurs, to argue for government intervention with fiscal policy. David McNally of the University of Houston argues in the Marxist tradition that the logic of the market inherently produces inequitable outcomes and leads to unequal exchanges, arguing that Adam Smith's moral intent and moral philosophy espousing equal exchange was undermined by the practice of the free market he championed. According to McNally, the development of the market economy involved coercion, exploitation and violence that Smith's moral philosophy could not countenance. McNally also criticizes market socialists for believing in the possibility of fair markets based on equal exchanges to be achieved by purging parasitical elements from the market economy such as private ownership of the means of production, arguing that market socialism is an oxymoron when socialism is defined as an end to wage labour. [39]

Some would argue that only one known example of a true free market exists, namely the black market. The black market is under constant threat by the police, but under no circumstances do the police regulate the substances that are being created. The black market produces wholly unregulated goods and are purchased and consumed unregulated. That is to say, anyone can produce anything at any time and anyone can purchase anything available at any time. The alternative view is that the black market is not a free market at all since high prices and natural monopolies are often enforced through murder, theft and destruction. Black markets can only exist peripheral to regulated markets where laws are being regularly enforced.[ citation needed ]

See also

Notes

  1. 1 2 3 Popper, Karl (1994). The Open Society and Its Enemies. Routledge Classics. ISBN   978-0-415-61021-6.
  2. Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. ISBN   978-0-8047-7566-3.
  3. Hayek, Friedrich (1941). The Pure Theory of Capital.
  4. Popper, Karl (2002). The Poverty of Historicism. Routledge Classics. ISBN   0415278465.
  5. Chartier, Gary; Johnson, Charles W. (2011). Markets Not Capitalism: Individualist Anarchism Against Bosses, Inequality, Corporate Power, and Structural Poverty. Brooklyn, NY:Minor Compositions/Autonomedia
  6. "It introduces an eye-opening approach to radical social thought, rooted equally in libertarian socialism and market anarchism." Chartier, Gary; Johnson, Charles W. (2011). Markets Not Capitalism: Individualist Anarchism Against Bosses, Inequality, Corporate Power, and Structural Poverty. Brooklyn, NY: Minor Compositions/Autonomedia. p. back cover.
  7. "But there has always been a market-oriented strand of libertarian socialism that emphasizes voluntary cooperation between producers. And markets, properly understood, have always been about cooperation. As a commenter at Reason magazine's Hit&Run blog, remarking on Jesse Walker's link to the Kelly article, put it: "every trade is a cooperative act." In fact, it's a fairly common observation among market anarchists that genuinely free markets have the most legitimate claim to the label "socialism." "Socialism: A Perfectly Good Word Rehabilitated" by Kevin Carson at website of Center for a Stateless Society.
  8. Nick Manley, "Brief Introduction To Left-Wing Laissez Faire Economic Theory: Part One".
  9. Nick Manley, "Brief Introduction To Left-Wing Laissez Faire Economic Theory: Part Two".
  10. "Cooperative Economics: An Interview with Jaroslav Vanek". Interview by Albert Perkins. Retrieved March 17, 2011.
  11. The Political Economy of Socialism, by Horvat, Branko (1982), pp. 197–98.
  12. Adam Smith, The Wealth of Nations Book V, Chapter 2, Part 2, Article I: Taxes upon the Rent of Houses.
  13. House Of Commons May 4th; King's Theatre, Edinburgh, July 17
  14. Backhaus, "Henry George's Ingenious Tax," pp. 453–58.
  15. Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. p. 21. ISBN   978-0-8047-7566-3. For Walras, socialism would provide the necessary institutions for free competition and social justice. Socialism, in Walras's view, entailed state ownership of land and natural resources and the abolition of income taxes. As owner of land and natural resources, the state could then lease these resources to many individuals and groups which would eliminate monopolies and thus enable free competition. The leasing of land and natural resources would also provide enough state revenue to make income taxes unnecessary, allowing a worker to invest his savings and become 'an owner or capitalist at the same time that he remains a worker.
  16. 1 2 Judd, K. L. (1997). "Computational economics and economic theory: Substitutes or complements?" (PDF). Journal of Economic Dynamics and Control . 21 (6): 907–42. doi:10.1016/S0165-1889(97)00010-9.
  17. "Archived copy". Archived from the original on 2014-05-22. Retrieved 2014-06-06.CS1 maint: archived copy as title (link)
  18. "Farm Program Pays $1.3 Billion to People Who Don't Farm". Washington Post . 2 July 2006. Retrieved 3 June 2014.
  19. Ip, Greg and Mark Whitehouse, "How Milton Friedman Changed Economics, Policy and Markets", Wall Street Journal Online (November 17, 2006).
  20. "Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism", Ha-Joon Chang, Bloomsbury Press, ISBN   978-1596915985
  21. Theory of Value by Gérard Debreu.
  22. Hayek cited. Petsoulas, Christina. Hayek's Liberalism and Its Origins: His Idea of Spontaneous Order and the Scottish Enlightenment. Routledge. 2001. p. 2.
  23. Smith, Adam (1827). The Wealth of Naton. Book IV. p. 184.
  24. Worstall, Tim. "This Is What Adam Smith Meant By Invisible Hand". Forbes. April 25, 2014. Retrieved March 20, 2019.
  25. Smith, Adam (1776). "2". The Wealth of Nations. 1. London: W. Strahan and T. Cadell.
  26. Hacker, Jacob S.; Pierson, Paul (2010). Winner-Take-All Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class. Simon & Schuster. p. 55.
  27. Hunt, Michael H (2004). The World Transformed: 1945 To The Present. Boston: Bedford/St. Martin's: Oxford University Press. p. 313.
  28. Ayal, Eliezer B. and Karras, Georgios. "Components of Economic Freedom and Growth." Archived 2008-05-27 at the Wayback Machine Journal of Developing Areas, Vol. 32, No. 3, Spring 1998, pp. 327–38. Publisher: Western Illinois University.
  29. COLE, Julio H. and LAWSON, Robert A. Handling Economic Freedom in Growth Regressions: Suggestions for Clarification. Econ Journal Watch, Volume 4, Number 1, January 2007, pp. 71–78.
  30. DE HAAN, Jacob and STURM, Jan-Egbert. How to Handle Economic Freedom: Reply to Lawson. Econ Journal Watch, Volume 3, Number 3, September 2006, pp. 407–411.
  31. DE HAAN, Jacob and STURM, Jan-Egbert. Handling Economic Freedom in Growth Regressions: A Reply to Cole and Lawson. Econ Journal Watch, Volume 4, Number 1, January 2007, pp. 79–82.
  32. "Principles of the Free Market" (2009). Free Market Monument Foundation.
  33. Tarbell, Ida (1904). The History of the Standard Oil Company. McClure, Phillips and Co.
  34. 1 2 Saul, John The End of Globalism.
  35. "Cliche #41: "Rockefeller’s Standard Oil Company Proved That We Needed Anti-Trust Laws to Fight Such Market Monopolies", The Freeman , January 23, 2015. Retrieved December 20, 2016.
  36. "Cornel West: Democracy Matters", The Globalist , January 24, 2005. Retrieved October 9, 2014.
  37. Michael J. Sandel (June 2013). Why we shouldn't trust markets with our civic life. TED. Retrieved January 11, 2015.
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  39. McNally, David (1993). Against the Market: Political Economy, Market Socialism and the Marxist Critique. Verso. ISBN   978-0-86091-606-2.

Further reading

Related Research Articles

The economic calculation problem is a criticism of using economic planning as a substitute for market-based allocation of the factors of production. It was first proposed by Ludwig von Mises in his 1920 article "Economic Calculation in the Socialist Commonwealth" and later expanded upon by Friedrich Hayek.

A market economy is an economic system in which the decisions regarding investment, production and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.

A mixed economy is variously defined as an economic system blending elements of market economies with elements of planned economies, free markets with state interventionism, or private enterprise with public enterprise. There is no single definition of a mixed economy, but rather two major definitions. The first of these definitions refers to a mixture of markets with state interventionism, referring to capitalist market economies with strong regulatory oversight, interventionist policies and governmental provision of public services. The second definition is political in nature and strictly refers to an economy containing a mixture of private enterprise with public enterprise.

This aims to be a complete article list of economics topics:

Laissez-faire is an economic system in which transactions between private parties are free from any form of government intervention such as regulation, privileges, imperialism, tariffs and subsidies. Proponents of laissez faire argue for a complete separation of government from the economic sector. The phrase laissez-faire is part of a larger French phrase and literally translates to 'let [it/them] do'; however, in this context, the phrase usually means 'let go'.

In classical economics, Say's law, or the law of markets, is the claim that the production of a product creates demand for another product by providing something of value which can be exchanged for that other product. So, production is source of demand. In his principal work, A Treatise on Political Economy, Jean-Baptiste Say wrote: "A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value." And also, "As each of us can only purchase the productions of others with his own productions – as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase."

Oskar R. Lange Polish economist

Oskar Ryszard Lange was a Polish economist and diplomat. He is best known for advocating the use of market pricing tools in socialist systems and providing a model of market socialism. He responded to the economic calculation problem proposed by Ludwig von Mises and Friedrich Hayek by claiming that managers in a centrally-planned economy would be able to monitor supply and demand through increases and declines in inventories of goods, and advocated the nationalization of major industries. During his stay in the United States, Lange was an academic teacher and researcher in mathematical economics. Later in socialist Poland, he was a member of the Central Committee of the Polish United Workers' Party.

In economics, a price system is a component of any economic system that uses prices expressed in any form of money for the valuation and distribution of goods and services and the factors of production. Except for possible remote and primitive communities, all modern societies use price systems to allocate resources, although price systems are not used exclusively for all resource allocation decisions.

Criticism of socialism refers to any critique of socialist models of economic organization and their feasibility as well as the political and social implications of adopting such a system. Some criticisms are not directed toward socialism as a system, but rather toward the socialist movement, parties or existing states. Some critics consider socialism to be a purely theoretical concept that should be criticized on theoretical grounds while others hold that certain historical examples exist and that they can be criticized on practical grounds. Because there are many models of socialism, most critiques are focused on a specific type of socialism and the experience of Soviet-type economies that may not apply to all forms of socialism as different models of socialism conflict with each other over questions of property ownership, economic coordination and how socialism is to be achieved. Critics of specific models of socialism might be advocates of a different type of socialism.

The Lange model is a neoclassical economic model for a hypothetical socialist economy based on public ownership of the means of production and a trial-and-error approach to determining output targets and achieving economic equilibrium and Pareto efficiency. In this model, the state owns non-labor factors of production, and markets allocate final goods and consumer goods. The Lange model states that if all production is performed by a public body such as the state, and there is a functioning price mechanism, this economy will be Pareto-efficient, like a hypothetical market economy under perfect competition. Unlike models of capitalism, the Lange model is based on direct allocation, by directing enterprise managers to set price equal to marginal cost in order to achieve Pareto efficiency. By contrast, in a capitalist economy managers are instructed to maximize profits for private owners, while competitive pressures are relied on to indirectly lower the price to equal marginal cost.

An economic ideology distinguishes itself from economic theory in being normative rather than just explanatory in its approach. Economic ideologies express perspectives on the way an economy should run and to what end, whereas the aim of economic theories is to create accurate explanatory models to describe how an economy currently functions. However, the two are closely interrelated, as underlying economic ideology influences the methodology and theory employed in analysis. The diverse ideology and methodology of the 74 Nobel laureates in economics speaks to such interrelation.

The following outline is provided as an overview of and topical guide to libertarianism, a political philosophy that upholds liberty as its principal objective. As a result, libertarians seek to maximize autonomy and freedom of choice, emphasizing political freedom, voluntary association and the primacy of individual judgment.

Outline of economics Overview of and topical guide to economics

The following outline is provided as an overview of and topical guide to economics:

Economic liberalism political ideology

Economic liberalism is an economic system organized on individual lines, meaning that the greatest possible number of economic decisions are made by individuals or households rather than by collective institutions or organizations. It includes a spectrum of different economic policies but its basis is on strong support for a market economy and private property in the means of production. Although economic liberals can also be supportive of government regulation to a certain degree, they tend to oppose government intervention in the free market when it inhibits free trade and open competition.

Production for use is a phrase referring to the principle of economic organization and production taken as a defining criterion for a socialist economy. It is held in contrast to production for profit. This criterion is used to distinguish socialism from capitalism, and was one of the fundamental defining characteristics of socialism initially shared by Marxian socialists, evolutionary socialists, social anarchists and Christian socialists.

Throughout modern history, a variety of perspectives on capitalism have evolved based on different schools of thought.

The socialist calculation debate, sometimes known as the economic calculation debate, was a discourse on the subject of how a socialist economy would perform economic calculation given the absence of the law of value, money, financial prices for capital goods and private ownership of the means of production. More specifically, the debate was centered on the application of economic planning for the allocation of the means of production as a substitute for capital markets and whether or not such an arrangement would be superior to capitalism in terms of efficiency and productivity.

The Double Movement is a concept originated by Karl Polanyi in his book The Great Transformation. The phrase refers to the dialectical process of marketization and push for social protection against that marketization. First, laissez-faire reformers seek to "disembed" the economy in order to establish what Polanyi calls a "market society" wherein all things are commodified, including what Polanyi terms "false commodities": land, labor, and money. Second, a reactionary "countermovement" arises whereby society attempts to re-embed the economy through the creation of social protections such as labor laws and tariffs. In Polanyi's view, these liberal reformers seek to subordinate society to the market economy, which is taken by these reformers to be self-regulating. To Polanyi, this is a utopian project, as economies are always embedded in societies.