Free market question

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In summary: Though a free market incorporates both positive and negative feedback mechanisms, the positive feedback ones seem to dominate. From Wikipedia: “A free market is a term that economists use to describe a market which is free from economic intervention and regulation by government, other than protection of property rights (i.e. no regulation, no subsidization, no single monetary system and no governmental monopolies).” Though a free market incorporates both positive and negative feedback mechanisms, the positive feedback ones seem to dominate. In other words more successful companies tend to become more powerful, eventually dominating the market and becoming monopolies. Powerful companies are able to maintain subsistence level wages which severely limit the options of the workers. Without government regulation companies are free to discriminate as they
  • #1
kasse
384
1
In a free market, what happens to the people who lose their job in periods of bad conjuncture? To me it seems reasonable that the fall height is higher than in a welfare state.
 
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  • #2
kasse said:
In a free market, what happens to the people who lose their job in periods of bad conjuncture? To me it seems reasonable that the fall height is higher than in a welfare state.

Much higher. The employed make more money in a free market than an unfree market, and the unemployed get more money in a welfare state than in a non-welfare state.

I'm not sure what (absent charity) the solution is in a pure free market. Probably unemployment insurance, despite its moral hazard.
 
  • #3
kasse said:
In a free market, what happens to the people who lose their job in periods of bad conjuncture? To me it seems reasonable that the fall height is higher than in a welfare state.

Yes, but there are fewer unemployed, those who are employed are more productive and make more money, the standard of living for everyone is higher (even unemployed), and there is better fairness over who has a job and who doesn't (i.e fewer freeloaders), and the community, friends, and relatives learn to help each other more rather than rely on the state (and they do it more fairly because they better know who is lazy and who isn't).
 
  • #4
CRGreathouse said:
Probably unemployment insurance, despite its moral hazard.

Social security is not a human right, and it ought not to be. Buy a private unemployment insurance, I don't see the moral hazard with that. Is it better to steel from employed people?
 
  • #5
fleem said:
Yes, but there are fewer unemployed

Why is that?

And what do you call a person who supports a free market? Conservative? Liberal? Liberalist?
 
  • #6
kasse said:
Why is that?

The short answer is that the economy will simply be far healthier in a free market, and a healthy economy means jobs. The proof is in the pudding--its easy to see the historical correlation between free-marketism and wealth in the nations of the world. But there are rather obvious reasons for this. Here are a few:

1. Competition in the job market better matches employees with job requirements, resulting in more efficient operation. Forcing businesses to hire and pay people they wouldn't otherwise hire and pay, simply kills businesses.

2. Employees will be inspired to work harder because they'll be better rewarded for working hard.

3. Employees will be inspired to develop their skills more because if they don't, they'll end up with a lower-paying job. Rewarding everyone more equally reduces that inspiration.

4. Competence in industry inspires businesses to improve their product, making a free-market country competitive world-wide, and increasing the standard of living. Corporate welfare removes that inspiration.

5. Competence among regional governments (i.e. a federal government that keeps its hands out of local politics) causes those local governments to please their consituents/taxpayers more so they don't move away.

Certainly the free market has problems, but as I've said in other posts, some (not all) of those problems arise because we do not have a very free market in the west, yet the free-market naysayers blame freedom for those problems.

kasse said:
And what do you call a person who supports a free market? Conservative? Liberal? Liberalist?

Libertarian comes to mind.
 
  • #7
fleem said:
Yes, but there are fewer unemployed, those who are employed are more productive and make more money, the standard of living for everyone is higher (even unemployed), and there is better fairness over who has a job and who doesn't (i.e fewer freeloaders), and the community, friends, and relatives learn to help each other more rather than rely on the state (and they do it more fairly because they better know who is lazy and who isn't).

I don’t believe this is necessarily true.

From Wikipedia: “A free market is a term that economists use to describe a market which is free from economic intervention and regulation by government, other than protection of property rights (i.e. no regulation, no subsidization, no single monetary system and no governmental monopolies).”

Though a free market incorporates both positive and negative feedback mechanisms, the positive feedback ones seem to dominate. In other words more successful companies tend to become more powerful, eventually dominating the market and becoming monopolies.

This is more visible in the so called “banana republics” in which a few powerful companies have grown so powerful they control the government instead of the government controlling them. Powerful companies are able to maintain subsistence level wages which severely limit the options of the workers. Without government regulation companies are free to discriminate as they please and maintain the workplace as they want without regard to the safety of the workers. A worker who is fired often gets blacklisted and is unable to get another decent job. Older workers are let go and find it difficult or impossible to work. Without social security or welfare, these workers are found on the sidewalks begging for enough to eat.
 
  • #8
fleem said:
The short answer is that the economy will simply be far healthier in a free market, and a healthy economy means jobs. The proof is in the pudding--its easy to see the historical correlation between free-marketism and wealth in the nations of the world. But there are rather obvious reasons for this. Here are a few:

1. Competition in the job market better matches employees with job requirements, resulting in more efficient operation. Forcing businesses to hire and pay people they wouldn't otherwise hire and pay, simply kills businesses.

Like women, minorities and the handicapped?

fleem said:
2. Employees will be inspired to work harder because they'll be better rewarded for working hard.

Why? Monopolies have no incentive for rewarding workers.

fleem said:
3. Employees will be inspired to develop their skills more because if they don't, they'll end up with a lower-paying job. Rewarding everyone more equally reduces that inspiration.

Perhaps, if the company has a need for employees with higher skills. If the only company in town is a coal mine, taking night courses may not be all that useful.

fleem said:
4. Competence in industry inspires businesses to improve their product, making a free-market country competitive world-wide, and increasing the standard of living. Corporate welfare removes that inspiration.

But a free market doesn't always result in competition and many times it suppresses it.

fleem said:
5. Competence among regional governments (i.e. a federal government that keeps its hands out of local politics) causes those local governments to please their consituents/taxpayers more so they don't move away.

What?

fleem said:
Certainly the free market has problems, but as I've said in other posts, some (not all) of those problems arise because we do not have a very free market in the west, yet the free-market naysayers blame freedom for those problems.

In the U.S. the late 1800's and early 1900's many laws were passed limiting our free market, laws such as the Sherman Anti-Trust Act, the Clayton Act, the Interstate Commerce Act, and the Pure Food and Drugs Act. In addition many laws were passed prohibiting child labor, limiting the number of hours workers could be required to work in a day, mandating workplace safety, and minimum wages. Do you really believe we would be better off without this government regulation?


fleem said:
Libertarian comes to mind.
 
  • #9
"free market" is not synonymous with "anarchy", yet your response above makes it clear you believe they are synonyms. i am not an anarchist, as you imply.

Most complaints against the free market stem (and rightly so) from fear of anti-competitive behavior. The reason people fear anti-competitive behavior like trusts and monopolies is because they know competition is needed! You just defended anti-trust laws because you value competition (along with laws against murder, theft, taking advantage of children, etc.)!

The solution is for the government to promote and defend competitive behavior. What is not the solution, is to make the government BE a monopoly in ALL markets! I'd rather have fat cats spending their time trying to figure out how to find loopholes in laws AND ways to improve productivity and product quality rather than have lawmakers tweaking those laws for their own benefit.
 
  • #10
How come unemployed have a better standard of living in a free market than in a welfare state, when they don't receive the same support from and when those who work earn more than ever? It doesn't make sense!
 
  • #11
kasse said:
How come unemployed have a better standard of living in a free market than in a welfare state, when they don't receive the same support from and when those who work earn more than ever? It doesn't make sense!
Do you have any documentation to support this claim?
 
  • #12
It was fleem's claim.
 
  • #13
kasse said:
How come unemployed have a better standard of living in a free market than in a welfare state, when they don't receive the same support from and when those who work earn more than ever? It doesn't make sense!

Because the unemployed might come from a free market country where everyone has a higher standard of living to begin with? Until they are hired again they can live on unemployment, sell possessions they've acumulated while working, have plenty of opportunity to do side jobs until employed again... there's money to be had in a free market economy when not doing your primary work.
 
  • #14
drankin said:
Because the unemployed might come from a free market country where everyone has a higher standard of living to begin with? Until they are hired again they can live on unemployment, sell possessions they've acumulated while working, have plenty of opportunity to do side jobs until employed again... there's money to be had in a free market economy when not doing your primary work.
Got any documentation, or are we expected to believe your assertions?
 
  • #15
turbo-1 said:
Got any documentation, or are we expected to believe your assertions?

Just believe my assertions being someone who has done all of what I just wrote. LOL
 
  • #16
turbo-1 said:
Got any documentation, or are we expected to believe your assertions?

Of course, the degree of freedom in a market is not easily measured and is easily debated, but here's something for starters. The correlation is strong, and you'd have to make some pretty outrageous arguments to claim the freedom ratings for the regions are almost all grossly inaccurate--which is what you'd need to do to refute the obvious correlation:

http://www.heritage.org/Research/InternationalOrganizations/images/chart1.gif [Broken]
 
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  • #17
Correlation does nor imply causation.
 
  • #18
skeptic2 said:
Like women, minorities and the handicapped?

Why do you even make this statement? Does being a woman or a minority make you an inherently worse pick for a job? This is borderline racism. If you force businesses to employ people because of quotas and not ability you do tie the hands of the companies. If racism is a problem with some companies than others will come along and swoop up the best qualified people that were ignored. Lots have companies have prospered on resources that others have ignored and in the process they have changed how business is done, personnel are a resource like all others.

skeptic2 said:
Why? Monopolies have no incentive for rewarding workers.
Why the monopoly comment? If a company is free to hire/fire employees as the wish and to give raises as they wish then the best people will get the best pay at the best companies. Now there may still be companies that treat their employees badly, but they won't stand a chance in the long run against happy productive employees. Even in monopolies there is always a threat of having your workers taken by other industries. If you don't pay them enough they will leave and you will be left with the worst workers available for what you pay.

skeptic2 said:
Perhaps, if the company has a need for employees with higher skills. If the only company in town is a coal mine, taking night courses may not be all that useful.

If you work in a coal mining town and want a better job then you move. If enough people move then the mine either can't operate or they raise the pay and the price of coal. Having only one job available is never a good excuse for not moving up.

skeptic2 said:
But a free market doesn't always result in competition and many times it suppresses it.
So when companies lobby to have the government create artificial monopolies this is better than having a huge company that can do things better than smaller companies? Yes I admit that having a bad monopoly is possible in a truly free market, but it is inherently short lived. If you corner the market on sprockets and then raise the price enough, sooner or later someone is going to take the risk and start producing his own sprockets. Without artificial monopolies there is no way to permanently prevent competition. The government is the only power that can prevent you from making something, because they have the monopoly on force.

skeptic2 said:
In the U.S. the late 1800's and early 1900's many laws were passed limiting our free market, laws such as the Sherman Anti-Trust Act, the Clayton Act, the Interstate Commerce Act, and the Pure Food and Drugs Act. In addition many laws were passed prohibiting child labor, limiting the number of hours workers could be required to work in a day, mandating workplace safety, and minimum wages. Do you really believe we would be better off without this government regulation?
Some government regulation is a good thing such as child labor laws, but for the most part it solves problems that would have solved themselves. Minimum wage establishes itself without government mandate. If you raise the minimum wage then the money has to come from somewhere. The owners either cut profits (less profits in an industry means less growth and fewer jobs), they cut employees (again fewer jobs), or they raise prices which means that everyone who buys from them effectively takes a pay cut. On the other hand, there is truly a minimum you can pay employees before you can't get anyone to work for you, and in many places it is ABOVE the minimum wage.

I'm really tired of the idea that there is some magic evil rich person somewhere and when we raise taxes or minimum wage or increase regulations they just pull some extra money out of their pocket. There is no magical person. Most of us own businesses in the form of IRAs or other retirement investments. All of us pay the tax burden of the rich each time we buy something. The only person who gets stuck with the bill is the working person. Trying to stop free market because of inequities will eventually make everyone equal, but we will all be equal and poor.
 
  • #19
turbo-1 said:
Correlation does nor imply causation.

Yes it does.

Perhaps you meant to say, "Correlation does not imply a certain direction of causation". If that's what you were trying to say, then I guess you meant that possibly wealth breeds freedom of economy, rather than freedom of economy breeding wealth. Actually, I believe both occur. What was your point? That it is far more likely that wealth breeds freedom and extremely unlikely that freedom breeds wealth? You make such an off the wall statement (which also gives your argument nothing, to boot!) and then demand I give statistics? (Which I did with bells on, by the way!).
 
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  • #20
Chayced said:
So when companies lobby to have the government create artificial monopolies this is better than having a huge company that can do things better than smaller companies? Yes I admit that having a bad monopoly is possible in a truly free market, but it is inherently short lived. If you corner the market on sprockets and then raise the price enough, sooner or later someone is going to take the risk and start producing his own sprockets. Without artificial monopolies there is no way to permanently prevent competition. The government is the only power that can prevent you from making something, because they have the monopoly on force.
I've heard this idea before that the free market supposedly takes care of monopolies on its own but I have never seen a rationale for this. You say that some brave entrepreneur will come along and start a competing business. What happens when the monopoly tries to buy them out of chase them out of business? Monopolies are really quite good at mantaining themselves through various forms of legal coercion.
 
  • #21
fleem said:
"free market" is not synonymous with "anarchy", yet your response above makes it clear you believe they are synonyms. i am not an anarchist, as you imply.

Most complaints against the free market stem (and rightly so) from fear of anti-competitive behavior. The reason people fear anti-competitive behavior like trusts and monopolies is because they know competition is needed! You just defended anti-trust laws because you value competition (along with laws against murder, theft, taking advantage of children, etc.)!

I quoted Wikipedia as saying that a free market is free from government regulation. How would you maintain competition without government regulation? How would you ensure competition in a one company town that has just one auto plant, steel mill or coal mine which employs most of the workers in that town? How would you assure the safety of workers or the products they produce without government intervention? Competition doesn’t discourage child labor nor 14 hour days.

fleem said:
[snip] I'd rather have fat cats spending their time trying to figure out how to find loopholes in laws AND ways to improve productivity and product quality rather than have lawmakers tweaking those laws for their own benefit.

Which laws, those requiring a safe workplace for the workers, minimum wage laws or the overtime laws? Competition doesn't ensure the work place will be safe. It doesn't encourage businesses to pay minimum wage nor prevent 14 hour days. Why do you think so many companies hire illegal aliens? Productivity and product quality are only means to an end. The end is making money. If there were no government intervention and the company felt it could make more money by ignoring worker safety, by paying less than the minimum wage and forcing workers to work 70 hour weeks, what do you think it would do?
 
  • #22
Skeptic, please stop responding as if I said something I didn't say. If I made a post that said, "Skeptic, I don't believe you should have stolen all that money from that bank", would that not be the same as saying you did it? I suggest you calm down and go back and actually read what I said. You are arguing without reading. I'm not going to repeat myself any more.
 
  • #23
If welfare and big government is bad, how come the scandinavian countries suffer less than other countries during the financial crisis?
 
  • #24
kasse said:
If welfare and big government is bad, how come the scandinavian countries suffer less than other countries during the financial crisis?

suffer what? Please provide sources so we have something to talk about.
 
  • #27
fleem said:
Yes it does.

Perhaps you meant to say, "Correlation does not imply a certain direction of causation". If that's what you were trying to say, then I guess you meant that possibly wealth breeds freedom of economy, rather than freedom of economy breeding wealth. Actually, I believe both occur. What was your point? That it is far more likely that wealth breeds freedom and extremely unlikely that freedom breeds wealth? You make such an off the wall statement (which also gives your argument nothing, to boot!) and then demand I give statistics? (Which I did with bells on, by the way!).


What.
 
  • #28
Yes.
 
  • #29
TheStatutoryApe said:
I've heard this idea before that the free market supposedly takes care of monopolies on its own but I have never seen a rationale for this. You say that some brave entrepreneur will come along and start a competing business. What happens when the monopoly tries to buy them out of chase them out of business? Monopolies are really quite good at mantaining themselves through various forms of legal coercion.
I believe the argument goes something like this. First there are only two alternatives to the private monopoly: a public monopoly (e.g. the old US post office), or public regulation. Both of these also have carrying costs. Second, the private monopoly left to itself in the absence of competition inevitably becomes bloated and inefficient. Then comparative advantage offers large benefits to both customers and possible competitors to make the investment required to find radical alternatives well outside the monopoly's area of market control, and the monopoly eventually falls.
 
  • #30
kasse said:
http://www.nytimes.com/2009/05/14/business/global/14frugal.html?_r=1

And how come the scandinavian countries are the best countries to live in when they also have the most developed welfare systems?
Yes, first thing the US needs to do to economically emulate the Norwegians is ... become one the world's largest oil exporters:
NYT said:
...Still, even Ibsen might concede that it is easier to stand alone when your nation has benefited from oil reserves that make it the third-largest exporter in the world.
NYT said:
“The U.S. and the U.K. have no sense of guilt,” said Anders Aslund, an expert on Scandinavia at the Peterson Institute for International Economics in Washington. “But in Norway, there is instead a sense of virtue. If you are given a lot, you have a responsibility.”
'Anders' is demonstrably wrong: if one looks at the charitable giving in the US per capita, it's far higher than other countries.
 
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  • #31
kasse said:
Yes.

Well that's just great, kasse. I solute you and your homeland. Do you have a point?
 
  • #32
chayced said:
Why do you even make this statement? Does being a woman or a minority make you an inherently worse pick for a job? This is borderline racism. If you force businesses to employ people because of quotas and not ability you do tie the hands of the companies. If racism is a problem with some companies than others will come along and swoop up the best qualified people that were ignored. Lots have companies have prospered on resources that others have ignored and in the process they have changed how business is done, personnel are a resource like all others.

Why do I make that statement? Because I go to Mexico occasionally and I read the want ads including by U.S. companies. Many of them have statements such as: Female, 18 to 24, attractive, unmarried. Or male, 18 to 35. It's not at all that others not fitting the description are less qualified. It's that the law permits that type of discrimination so they do it. As far as it being borderline racism, it's not borderline, it's blatant racism. The Native Americans in Mexico find it almost impossible to find a job. The funny thing is there don't seem to be any companies that want to swoop up the unemployed Native Americans.

chayced said:
Why the monopoly comment? If a company is free to hire/fire employees as the wish and to give raises as they wish then the best people will get the best pay at the best companies. Now there may still be companies that treat their employees badly, but they won't stand a chance in the long run against happy productive employees. Even in monopolies there is always a threat of having your workers taken by other industries. If you don't pay them enough they will leave and you will be left with the worst workers available for what you pay.

This simply is not true. Go to countries that don't have the government regulation we have and you will find there is less competition, not more. You will find workers with fewer rights and a greater difference between the salaries of the executives and the wages of the workers.

chayced said:
If you work in a coal mining town and want a better job then you move. If enough people move then the mine either can't operate or they raise the pay and the price of coal. Having only one job available is never a good excuse for not moving up.

If your only skill is mining coal, where are you going to go - another coal mining town? The problem is in areas where there is only one employer, wages tend to be lower because of the lack of competition. If one's wages are low enough, there is a point where the worker can't afford to quit and look for another job. This was taken advantage of in the 19th century by some employers forcing employees to buy supplies from them at prices that drove the employees into debt. Those employees were no longer free to quit.

chayced said:
So when companies lobby to have the government create artificial monopolies this is better than having a huge company that can do things better than smaller companies? Yes I admit that having a bad monopoly is possible in a truly free market, but it is inherently short lived. If you corner the market on sprockets and then raise the price enough, sooner or later someone is going to take the risk and start producing his own sprockets. Without artificial monopolies there is no way to permanently prevent competition. The government is the only power that can prevent you from making something, because they have the monopoly on force.

Actually, without government intervention and regulation, monopolies are remarkably stable. Look at Chiquita and Dole in Honduras. How much competition do they have? How long have they been in business? Speaking of Honduras, there is some evidence now that the real cause of the coup wasn't that President Zelaya wanted another term, it was that he had raised the minimum wage and Chiquita and Dole were mad.

chayced said:
Some government regulation is a good thing such as child labor laws, but for the most part it solves problems that would have solved themselves. Minimum wage establishes itself without government mandate. If you raise the minimum wage then the money has to come from somewhere. The owners either cut profits (less profits in an industry means less growth and fewer jobs), they cut employees (again fewer jobs), or they raise prices which means that everyone who buys from them effectively takes a pay cut. On the other hand, there is truly a minimum you can pay employees before you can't get anyone to work for you, and in many places it is ABOVE the minimum wage.

Well of course they raise prices. And when they raise prices, they raise them enough for everyone to get a raise. If they didn’t, the workers would eventually make more than management. In the end it all comes out the same. I suppose there could be minimum wage below which a company won’t find workers. For a monopoly, that would probably be at the subsistence level and somewhat higher for skilled workers in a competitive environment.

chayced said:
I'm really tired of the idea that there is some magic evil rich person somewhere and when we raise taxes or minimum wage or increase regulations they just pull some extra money out of their pocket. There is no magical person. Most of us own businesses in the form of IRAs or other retirement investments. All of us pay the tax burden of the rich each time we buy something. The only person who gets stuck with the bill is the working person. Trying to stop free market because of inequities will eventually make everyone equal, but we will all be equal and poor.

Is this what you think we believe?
 
  • #33
Well, it's not only the oil exporter Norway that have had success with the welfare system, but also countries like Sweden, Denmark and Germany.
 
  • #34
TheStatutoryApe said:
I've heard this idea before that the free market supposedly takes care of monopolies on its own but I have never seen a rationale for this. You say that some brave entrepreneur will come along and start a competing business. What happens when the monopoly tries to buy them out of chase them out of business? Monopolies are really quite good at mantaining themselves through various forms of legal coercion.

Company stores- Mines and other monopolies that controlled the entire town used to set up company stores where the prices were set to recoup the wages that the mine spent. Things like the Sears Catalog and others made mail order items available to people who used to have only one place to shop.

Record Labels - This may not seem like a monopoly, because it is in fact an Oligopoly. A hand full of producers were in charge of all aspects of the recording industry (including radio). Remember when CDs cost $20? The reason they are cheaper now is Walmart. Walmart dictated that either the Labels would reduce the price of CDs or they would stop selling them. Also have you noticed the rise of indie artists? When you have a handful of companies making CDs for 25c each and selling them for $20 each with the artist making pennies then somethings got to give!

Cable TV- Back in the day if you wanted non broadcast channels it was either cable or satellite. Now there is Dish network, Direct TV, and high speed Internet based TV. Again you can't charge insane prices forever.

Railways- Used to be the only way to move cargo. This was a geographic monopoly, and although it is certainly cheaper for a single company to operate a single set of rails in a area vice having two competing railways, if you charge too much for too long someone will find a different way. Now trucking freight is another alternative and the railways are put in their place.

Postal Service- Although this is a government enforced monopoly, and not part of my direct example, other services like FedEx and UPS have sprung up to give the public what they needed in spite of a monopoly.

Newspapers- One of the most hated monopolies whenever they exist, however back before modern technology if a paper was to charge to much or slant their opinions too much then someone would start an independent paper.

We tend to forget about all the businesses that pop up destroying the competition by offering goods at lower prices because we never get overcharged enough to think that the predecessor was a monopoly. Small towns have prime examples of monopolies when there is only one store in town that sells certain items, but we don't think of them as such. When we have a cheaper alternative we don't think 'yay the evil monopoly is gone' we simply go on with life as usual.

To answer your question, yes companies with monopolies do fight hard to keep them, and will drive out the little guy if they can. If the monopoly gets greedy enough though then someone else will come along and fight them to carve out some profits themselves while at the same time helping the public. You don't go into business expecting everyone to be happy that your here! The worst case scenario is a monopoly that uses the government to stop its competition. If I produced a car that ran on cow manure and lasted forever, but the big auto makers passed legislation deeming my technology unsafe or otherwise illegal I would never even get the chance to compete in the free market.
 
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  • #35
Chayced said:
To answer your question...
Most of your examples have involved improvements in technology. They have also almost all been examples of competition arising in the US during the era since regulations have been put in place to prevent monopolies.

Can you explain the dynamic which would prevent monopolies absent regulation? And examples that do not require innovation?

Innovation is the only thing I can think of that really is the bane of a monopoly unless it is lucky enough or smart enough to move forward with the times. This has nothing to do with a free market though.
 
<h2>What is a free market?</h2><p>A free market is an economic system in which prices for goods and services are determined by the open market and consumers and producers are free to make their own economic decisions without interference from the government or other external forces.</p><h2>What are the advantages of a free market?</h2><p>Some advantages of a free market include increased efficiency, innovation, and competition, as well as the ability for individuals to make their own economic choices and potentially achieve economic success.</p><h2>What are the limitations of a free market?</h2><p>One limitation of a free market is the potential for market failure, in which the market does not produce an optimal outcome for society as a whole. This can occur due to externalities, information asymmetry, or the presence of monopolies. Additionally, a free market may not adequately address issues such as income inequality or environmental concerns.</p><h2>How does a free market differ from a command economy?</h2><p>A free market allows for individual decision-making and is driven by supply and demand, while a command economy is controlled by the government and decisions are made based on central planning. In a free market, prices are determined by the market, whereas in a command economy, prices are set by the government.</p><h2>What role does the government play in a free market?</h2><p>In a free market, the government's role is typically limited to protecting property rights, enforcing contracts, and regulating certain industries to ensure fair competition. However, the extent of government intervention in a free market can vary depending on the country and its economic policies.</p>

What is a free market?

A free market is an economic system in which prices for goods and services are determined by the open market and consumers and producers are free to make their own economic decisions without interference from the government or other external forces.

What are the advantages of a free market?

Some advantages of a free market include increased efficiency, innovation, and competition, as well as the ability for individuals to make their own economic choices and potentially achieve economic success.

What are the limitations of a free market?

One limitation of a free market is the potential for market failure, in which the market does not produce an optimal outcome for society as a whole. This can occur due to externalities, information asymmetry, or the presence of monopolies. Additionally, a free market may not adequately address issues such as income inequality or environmental concerns.

How does a free market differ from a command economy?

A free market allows for individual decision-making and is driven by supply and demand, while a command economy is controlled by the government and decisions are made based on central planning. In a free market, prices are determined by the market, whereas in a command economy, prices are set by the government.

What role does the government play in a free market?

In a free market, the government's role is typically limited to protecting property rights, enforcing contracts, and regulating certain industries to ensure fair competition. However, the extent of government intervention in a free market can vary depending on the country and its economic policies.

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