You cannot have efficient free markets without rules, because of the presence of externalities and monopolies. That's Econ 101. Beyond that, I'd argue you can't have markets at all without rules. Markets do not generally develop in situations where killing your counter-party and taking his stuff is allowed.
You cannot have free markets period; a free market is an simple economic ideal that is unachievable in the real world, something like a "frictionless surface" or a "perfectly thermoconducting sphere".
What the best approximation you can acheive to a free market is depends on exactly what the features of the concrete set of products you are concerned with is, what features of the free market you prioritize approximating, and what technology (both technical and social) is available in the environment you are working in.
An efficient free market maximizes production. Markets in which companies can externalize costs or engage in monopoly behavior produce less than markets in which these behaviors are prevented.
"Free market" is not synonymous with "anything goes." It's a specific economic (rather than ideological) concept. Most economists believe that certain rules and restrictions are necessary to have any functioning market at all.
The usual economic definition of efficiency would be maximizing utility experienced by market participants, not maximizing production.
Currency-denominated "product" measurements are a common proxy measure for utility, but that's a compromise to the inability to measure utility directly.
> In a free market, everything is allowed, no? There is no arbiter to enforce any rules.
That's not really how you keep a market free. A free market requires regulation. Without it, you get a market dominated by monopolies and cartels, rather than open competition.
According to most supporters of the free market, at least among libertarian types, a free market will prevent monopolies and cartels from forming without regulation
I don't know how much I agree with that, but your opinion certainly isn't universal.
Yeah, but there's little evidence to support that. Corporations will form cartels and monopolies if they get the chance. Unless they consider enabling corporations also a form of regulation (which is kinda true). I do agree that we'd have a more free market without corporations.
Of course, with sufficient lack of regulation, it also becomes possible to just shoot people who monopolize stuff.
Libertarians are not a single group of people - and most libertarians agree that government is necessary to ensure the Law is respected - only a fraction of libertarians actually think no government is necessary at all. What most libertarians agree on is that Big Government is a Bad thing, not that it should be completely removed.
That's a straw man so obvious, it almost self-labels as a strawman. "When libertarians say they want a free market, they aren't actually saying they want a free market..." Come on, if you have to stoop that far, when you're deliberately and openly rewriting the terms that somebody else is using, why not just admit you don't actually have an argument?
What rewriting? "Night-watchman state" and "necessary axioms for the Efficient Market Hypothesis to hold" are completely different things. The libertarians are making an argument from (broadly, there are several branches of libertarianism, after all) Nozickian ethics and conflating it with mainstream economics.
No. Not at all. I really wish people understood what "free market" means. Just like "free software" is used by people to mean open source, free as in libre not gratis, "free market" does not mean anarchy.
A free market is one which is free from government price intervention - subsidies, price floors, price ceilings but also free of monopolies and cartels. In practice, a government may need to step in to break up a monopoly or stop an anti-competitive cartel to maintain a free market.
That is false. A free market is properly defined as a market where the use of force is barred by the government.
So when the government itself initiates force in the market, it is not a free market.
There is no such thing as a monopoly without the use of force. You can temporarily have companies that have a very large share of their respective markets, but monopoly is not properly defined as "a very large company."
A cartel is just an opportunity for other people to make money by undercutting the cartel. For instance, if the cartel is maintaining artificially low wages, the competitor can take advantage by paying "normal" wages and getting the best employees. Hence, a cartel is not stable. (Unless it has government force backing it---as all modern successful cartels do.)
This bizarre fixation with the "use of force" as a critical dividing line is to my mind incomprehensible. "A free market is free except for the arbitrary restrictions I think are fundamental."
I've been thinking about this 'wage suppression cartel' as being the same basic idea as labor unions, only with the monopoly being on the side of business rather than labor.
But in a free market, contractual agreements would be upheld and enforced by an agreed upon arbiter.
Yup - it's the same basic idea as labor unions, but with participants taken from the group that controls 40% of the economy assets instead of those that have a near-minimum wage. That surely makes a difference in the amount of power that they can exert?
The basic idea of leveraging what you have a monopoly over is the same. But it is a good question you bring up of whether a group that controls 50% of economic assets in a particular industry is more powerful than a group that controls 50% of labor in the same industry.
A group where money is concentrated in a few hands, vs a group with thousands of members that controls a labor force that can be easily replaced by robots or outsourced? There is no color to that struggle, it's finished before it started.
collusion is absolutely consistent with free markets. Companies make deals ALL the time. Getting lower rates for supplies, fencing off markets, agreeing to not litigate, etc.
Looking at it another way...these companies are trying to keep their costs down (labor being #1). This in turn allows them to charge lower prices for their products while maintaining a profit margin that keeps investors happy. They are serving their consumers. We should be thanking them for being prudent and not engaging in labor bidding wars that would push their costs skyward. This is capitalism 101.
Companies make deals, but making deals across an industry to fix prices inputs undermines the market. If everyone that used bananas colluded to set artificially low prices, that might result in cheaper banana products, but would result in a deadweight loss. I.e. the loss sustained by the banana producers would outweigh the savings to the consumer.
This wasnt across an industry...this was between two companies...apple and google.
Even still your analogy is still wrong...you are talking about banana consumers (which inherently will always go for the cheapest banana products that satisfy their needs) vs. a business who is trying to keep their costs down to remain competitive.
There is an saying that everything in business should be viewed from the eyes of the consumer. If the consumer is getting the same product for cheaper and the business model is still viable (aka the business can sustain that price) then it's a net win.
Again in your example, banana producers will lower their prices until they cannot be viable and thus they will stop supplying bananas. You cannot collude enough to keep failing business models in business.
> you are talking about banana consumers (which inherently will always go for the cheapest banana products that satisfy their needs) vs. a business who is trying to keep their costs down to remain competitive.
I'm talking about companies that buy bananas, not consumers. The supply chain looks like Farmers -> Dole/Chiquita -> You. If Dole and Chiquita colluded to keep the cost of bananas from farmers low, that is collusion that creates economic inefficiency.
> There is an saying that everything in business should be viewed from the eyes of the consumer. If the consumer is getting the same product for cheaper and the business model is still viable (aka the business can sustain that price) then it's a net win.
This "saying" is blathering that has no basis in economics.
