Talk:Free market/Archive 1

Archive 1

Archive 2

Archive 3

→

Archive 5

Some general comments

I have a lot of problems with this article but I wanted to discuss them in talk.

It's not true for example that many or even most socialists are against market economies nor is it true that most socialist countries have command economies. Most socialist parties in Western Europe aren't against market economies or for command economies. Also since the fall of the Soviet Union there aren't many command economies left.

it's a false dichotomy, and the entire article is obviously ideologically bias. Read commodity markets for a more neutral view of what a market is, and intellectual capital for a neutral view of debates on what roles flags, brands, and labels should play in establishing various guarantees for buyers. This article, if it exists at all, should follow the style of those.

Also it's not clear to me the distinction between this article and the article on market economies.

there isn't much of one, nor should there be, as the term "free market" is an ideological term adopted by people who promote absolute trust in market economies without much or any role for flags or labels as signals of trust.

---

Fixed this up a bit. One problem here is that the terms socialism and capitalism are used in fundamentally different ways in China and the West.

---

Removed this. Most socialist nations don't have command economies any more. Also, most nations *don't* have mixtures of market and command economies, they have state intervention in market economies which is different.

Free Markets and Capitalism

In contrast to the political terms capitalism and socialism the concept of the free market is purely economic. Nations tend to have an economic system that accords with their government's political ideology. Hence, democratic countries tend to have economies that are closer to a free market, while socialist countries generally have command economies. Despite official support for one economic model or another, nations generally have a mix of some sort.

Many dictatorships have actually come closer to the ideal free market than any democracy ever has. See Pinochet's Chile, for example. Also, historically speaking, the rise of (full) democracy has coincided with the rise of socialism and increased government regulation of the economy. The monarchies and limited democracies (only wealthy white males could vote) of the 19th century were far closer to "free markets" than any 20th century democracy. In general, in the West, socialism and democracy go hand in hand. The Soviet Union was the first exception to this rule, and it is from the Soviet Union that all the other similar exceptions drew their inspiration.

I don't know what you're talking about. There's plenty of Western capitalism, even in high-regulatory economies like France. Trey Stone 05:01, 15 Dec 2004 (UTC)

Capitalism as implemented in democratic countries (such as America, Canada, and most of industrial Europe) tends to be a mix between capitalism and statism (see state capitalism).

"Statism" always sounded like a very fuzzy and ambiguous term to me. It seems to be a word mostly used by libertarians as a synonym for "anything we don't like". A (modern) mixed economy incorporates elements of capitalism and socialism.

In these countries, the government routinely intervenes in the operation of the economy. Government intervention in the U.S. includes the granting of monopolies (such as franchises for cable TV or intellectual "property" rights) or the break-up of monopolies (as the dissolution of AT&T into the Baby Bells).

It might be nice to sometime have some compare & contrast between Free market and Capitalism. Followers of Ayn Rand tend to think of them as basically identical, while some radical Free market Libertarians consider such instituions as the corporation as being a state-imposed distortion against a true Free Market.

Where are all those libertariansim coming from? The ideology is called liberalism dammit! BL 00:01, 5 Oct 2003 (UTC)

Once upon a time, you were perfectly correct. Alas, these days the word has been made captive of a movement that in now way reflects the mores and values of classical Liberism- whereas Libertarian thought does.- Deliberatus

As an american, my best take on liberalism vs. libertarianism is that around the turn of the 20th century, the liberals became progressives (e.g. Presidents Wilson, Roosevelt), arguing liberalism was really defined by it being progressive and that further progress to statism is also liberal. From then on, the people you all in europe would call liberals became libertarians.Mrdthree 02:57, 25 March 2006 (UTC)

Neo-liberalism

I don't think it's fair to use "free market" and "neo-liberal" as synonyms. Neo-liberal implies some sort of managed free-trade-lite system, as under NAFTA or the WTO, which many free market advocates oppose. I altered the opening line of the entry.Nat Krause 22:24, 16 Feb 2004 (UTC)

BL: "liberal", to Americans means "social democratic" nowadays.

The paragraph starting "in reality there are no totally free or ideal markets" is biased. A free market is simply one without coercive interference; "lack of perfect knowledge", supposedly-"monopolistic practices", "cartels", "insider trading" and "price fixing" (by non-governmental agencies) are in no way "anti-market"

Of course, those aren;t anti-market. But they are anti-free - and the problem here is that the thing described by the concept "free market" is rarely free. But if you think that section is POV, why don't you try to rephrase it to explain how free markets can be (tend towards?) authoritarian/fascist.

(and Rothbard has shown that a "monopoly" in the sense used here is entirely a creation of coercive interference, and cannot arise in a free market)

But that's rather the point. If you have a "free market" in the sense of a market that is unregulated by the state, the market falls under the influence of private coercive interference. It's impossible to have a truly free market - i.e., a market that is free from coercive interference.

According to the view being described, cartels and price-fixing are not coercive interference, unless they are being enforced by violence. If all the bakers in town agree to sell a one-pound loaf for one dollar, that is classic price-fixing. But it only becomes coercive if, when a new baker starts up selling for ninety cents, the old ones come round and threaten him. The peaceful cartel does no violence to its members or its customers -- after all, each baker individually has the right to sell for one dollar; no customer's rights are violated by the simple fact that no ninety-cent bread is available at time t. If a customer doesn't like it, he can set up his own bakery, or eat tacos instead of sandwiches. --FOo 12:55, 25 Aug 2004 (UTC)

But that confuses general coercion (ie, force) with specifically violent enforcement. Most generally mooted types of coercive interference by government do not, ater all, involve any violence, or even the threat of violence. There are many types of coercion. For instance, in the situation you describe, the cartel is likely to have a strangle-hold on the supplies necessary to bake bread. They use their position to prevent the suppliers selling those supplies to our naive new baker, by threatening to withdraw their custom. Thus they prevent, through coercion, any competition.

Again, this depends on your definition of coercion. A person who describes cartels as not inherently coercive simply means that the formation of a cartel can take place solely by parties entering willingly into mutual agreements. If the baking cartel has negotiated an exclusive contract with a miller (who sells wheat flour) then yes, any non-cartel baker will need to find a different flour supplier ... or perhaps make cornbread instead of wheat bread ... or perhaps become a greengrocer instead.

Indeed, the cartel monopoly may continue even if the miller has the legal choice to terminate the contract -- he may simply not choose to. Perhaps he regards his personal honor highly, and would consider breaking the contract to be breaking his word to the longstanding bakers in the town. For a new baker to demand that the contract be broken and the miller forced to sell him flour would indeed require coercion: since the miller does not choose to terminate the cartel contract, he would have to be coerced to do so.

The question then is whether an outside party who wishes to enter a market has the right to force others to break their established contracts and supply him against their will. This would seem far more coercive than the cartel situation in the first place. I understand that some argue that this "coercion" is better than the other "coercion", but that strikes me as a difference of taste. Some people find it more distasteful when a "naïve new baker" who doesn't understand the existing contracts in his chosen business fails thereby; others find it more distasteful when an honorable old miller is forced to abrogate his word and contract.

By the way, I would suggest that in a discussion where you are trying to distinguish coercion from violence, you should consider avoiding violent metaphors such as "stranglehold" to refer to nonviolent actions such as an exclusive contract. A stranglehold, after all, is a way of violently subduing or killing a human being. The cartel has not killed our would-be baker. He simply made an uninformed decision and took a business loss. He should have secured a contract for flour before buying a storefront and a big oven. --FOo 01:53, 26 Aug 2004 (UTC)

I'm still not sure exactly how it has been illustrated that a monopoly cannot exist in a actual free market (in the sense of one free from government interference). Are you arguing that Rothbard is wrong, and that a monopoly can indeed exist within a free market? Or are you arguing that it isn't a monopoly if all parties in that monopoly are willing participants? Or have I lost the thread of the argument somewhere? If you're arguing that Rothbard is wrong, I'm not really able to comment upon that and shall bow to your better-informed analysis. If I've merely lost the thread here, then I can but apologise.

If you're arguing the second, I would point out that parties who are not a willing part of any such agreement as you describe may nevertheless be bound by that agreement, and as such are thus surely subject to coercion regardless of how willingly the parties of the agreement entered into it. One could argue that (keeping to the hypothetical described) those affected by the shadey dealings of the bakers' cartel could move to a different town. But that again undermines the notion of coercisive interference being something governments do: Any government which intervenes in the operation of the market within its nation's borders is not using any coercive force as long as you are free to leave that country. It follows from this that, by choosing not to leave that town or country, the consumer of baked goods or citizen is effectively entering into an agreemnt with the cartel or government. So, if coercive interference doesn't exist in the free market, it doesn't exist in the regulated one either. Accepting that one can define coercion in different ways, however one chooses to define it, one must accept that it applies or does not apply equally to both the free and the democratically accountable market - if it isn't force when private monopolies do it, it isn't force when governments do it either. Again, we're left with a concept that doesn't seem to exist, a myth, a fruitful piece of spin in the service of vested interests.

It seems to me, still, that a free market as described by its advocates simply cannot exist. Adam Smith was wrong about the invisible hand. Both theory and experience shows this. The notion of a free market is a deceptive one - either such a market is subject to private coercion, or, as long as it remains democratically accountable, the regulated market is not subject to coercion. If one accepts that a free market is indeed subject to coercion but assert that such markets do exist, then the concept is no more than a semantic trick. If one accepts that the given concept of a free market is, shall we say, a Platonic ideal, and accepts the existence of private coercion in any actual free market (as described in the section that has been called into question), then surely the article as it stands is excellent and just. (I fear such acceptance, that the free market is merely an unreachable ideal, may be barely a step away from socialism.)

Finally, I assert my right to use metaphors in whatever way I choose and assume willing agreement that metaphors shall be taken as metaphors, and not wilfully mis-interpreted.

Oh, and: What if the bakers' cartel exploits its monopolistic position to purchase the facilities and resources of all of the suppliers in the area? Wouldn't that, if nothing else so far, call for some good old-fashioned trust-busting, in your view?

The indentation is getting extreme, so I'm going back to level 1.

My point isn't that a monopoly can't exist in a free market. It is rather that the existence of certain types of cartels does not rule out the existence of a free market on the terms used above. This follows from the fact that persons are capable of making exclusive contracts; which follows from the fact that persons are capable of giving their word. If you wish to be a baker, you need flour. To get flour, you need someone to be willing to sell it to you. If all the flour in your district is already spoken for under exclusive contract, you cannot buy flour in your district.

I disagree with your analogy with governments. It is true that if two persons make a contract or exchange, that contract does have opportunity effects on other people. I would not, however, characterize this as the others being "bound" by the contract. If you have a car for sale and I buy it, then no other person may subsequently buy it from you -- it is no longer yours to sell. The contract is exclusive; the others have lost out on an opportunity. However, this does not mean that the car's unavailability is coerced upon them. It is simply a brute fact, like the unavailability of 30°C temperatures in the out-of-doors in Antarctica. Those who want a car must find someone who is willing to sell; those who want to be warm should consider the tropics, not the poles.

The hold that government has over territory and persons is not much like the unavailability of flour around the bakers' cartel, or the unavailability of your car after I have bought it. First off, these unavailabilities are consequences of agreements freely entered into. Except in the falsified history told by "social contract" theorists, this is not the case with government. Second, your inference that intervention is not coercion if you can leave the territory is a non sequitur. What makes an action coercion is not whether it is escapable by another, but whether it is imposed upon another. Considering opportunity costs (like the car above, or the flour) to be coercions leads to a bizarre world in which every action is a coercion of infinite scope, since every action cuts off an infinity of opportunities. Such a world is perhaps amenable to Foucauldian power discourse; it is not amenable to free-market or socialist economy. Ruling opportunity costs out as coercions avoids this absurdity.

To make this all more abstract: If Joe wishes to do things which require others' participation, then he has a number of choices: he can convince them to agree to participate willingly; he can force them to participate with intimidation or violence; he can give up on his original plan and decide to instead do things that people will go along with; or he can sit down and sulk till he starves. I propose that freedom-loving people, whether they call themselves "capitalists" or "socialists", regard the first as good, the second as bad, the third as good, and the fourth as bad. No?

--FOo 05:33, 26 Aug 2004 (UTC)

Comments on re-edits by Mihnea

Mihnea re-added some stuff, so I thought I'd explain why I took it out.

I'll explain why I re-added each bit under each of your comments. - Mihnea Tudoreanu

• I'm still not sure what government ownership of service means.

The phrase is not my own, but as I see it, it refers to government ownership of utilities, and/or the government providing various free services to its citizens.

• no artificial monopolies (i.e. patents) -- I took out patents because I thought it was controversial whether they count as artificial monopolies, although I am sympathetic to the argument that they are. Anyway, there are certainly other things that could be considered artificial monopolies, too.

I think at least one example of an artificial monopoly should be given. You're welcome to replace "patents" with something less controversial - or perhaps we should replace the "i.e. patents" with "such as patents, according to some opinions".

• The theory of the free market has trouble explaining the performance of many real markets such as the labor market, or financial markets. It explains better the markets for consumer products. This is an awfully broad statement to make without some kind of attribution. I would go so far as to say that I think it is untrue. But then, I have my own POV. I would at least like to see a little explanation and attribution on it if it's going to be in the encyclopedia. Also, the definition we give in the article lists "free market" as conceived-of condition, rather than a theory, so it's not clear what "the theory of the free market" means in this context.

Again, I wasn't the one who wrote that sentence. I just re-added it, because I thought it was useful. The idea that should be conveyed is that free market principles are geared towards the market for consumer products rather than the labor market or financial markets.

• The economic and political application of the concept of the ideal free market is known, primarily by detractors, as neoliberalism. I don't think it's accurate to state this as a 1 to 1 correspondence. For one thing, there are lots of schools of thought that are centered around the free market, libertarianism, etc., not just neoliberalism. And I tend to think of the latter as more of a pragmatic, realpolitik, hands-dirty version, anyway, rather than "ideal", although it's hard to get a read on what it really means. - Nat Krause 05:23, 27 Aug 2004 (UTC)

Well, the critics of the free market do call it "neoliberalism", and that is a fact that should be mentioned. I'm not saying that "free market" is the same as "neoliberalism"; I'm saying that "neoliberalism" is the name generally used for free market ideology by the opponents of such ideology. - Mihnea Tudoreanu

I made some edits to try to come up with neutral, acceptable language. I still feel that the "consumer markets / labor market" sentence was iffy, so I changed it around some and I think I can agree with its veracity now. I'm not sure it's true that opponents of the free market refer to it as neoliberalism generally, although they do sometimes. I recall during the 2000 presidential campaign hearing Nader and his supporters say on several occasions that neoliberalism isn't really the free market at all, but "corporate managed trade". - Nat Krause 07:45, 28 Aug 2004 (UTC)

You did a very good job at editing the article. I have no objections with its current form, so I think we can declare mission accomplished. ;)

As far as Ralph Nader is concerned, he never seems to make up his mind on whether he opposes the free market or not; he sometimes speaks of it positively, and I suspect that speech was one such occasion. - Mihnea Tudoreanu

Some believe... Others argue...

Not exactly great sourcing on a very controversial matter. -- Jmabel | Talk 09:16, Oct 17, 2004 (UTC)

"Underground" economy

The article now says, 'Currently, there are no totally free or ideal markets in operation, other than in the "underground" economy.' I believe this latter phrase is wrong. How can one say that a market that may be subject to police harrassment and is incapable of freely sharing price information is an ideal free market? It will inherently be somewhat inefficient, probably more so than a typical aboveground market. I am inclined to delete that recently-added claim, but thought I'd post first and see if others have strong arguments to make a different change than simple deletion. -- Jmabel | Talk 20:14, Dec 13, 2004 (UTC)

I completely agree with you. Some also might say that a free market cannot exist without property rights protection, something an underground economy lacks.

I went to a garage sale the other day and bought a beautiful Noguchi coffee table. I was never harrassed by the police, and not once did I look over my shoulder out of concern. And, price information was freely shared. As far as efficiency, there's nothing about a free market that says it has to be efficient. A free market is just one where there's no coercion occuring taking place. So ....I'm going put it back in ...the underground economy is huge.

One freely made transaction does not make a free market. Reverting. -- Jmabel | Talk 07:01, Dec 16, 2004 (UTC)

It was a large garage sale and a lot of people were there. It was a free market. The underground economy is huge. Billions of dollars exchanged. The free market exists.

Billions of dollars? Wow, that's some garage sale... :-) Rd232 21:53, 20 Dec 2004 (UTC)

by the way, i used to mow lawns for a living in the free market when i was a kid.

The expression "free market" is often used to imply "perfectly free market", in the sense that there are no government restrictions to trade. Since any government activity (including national defence and policing) can be construed as interference with trade of private persons (eg in the lawn mowing business, the government impedes you from whacking all your competitors), this requires anarchy. In any case, the modern concept of an absolute "free market" ideal (as opposed to minimising unnecessary government restrictions, which could also be considered 'free market') derives from the the idea of perfect competition. Which among other things requires perfect information, so unless any (well, all) of you are omniscient, a perfect/free market cannot exist. (And if we did have perfect information, there would be no difference between a market economy and a centrally-planned one.) Rd232 21:53, 20 Dec 2004 (UTC)

Free markets don't require "perfect information." They just require freedom. (RJII)

Also, the government preventing someone from "whacking" their competitors is not intefering with free trade but protecting it, and ensuring that it stays free. Free trade is simply trade occuring without coercion. Coercive force is distinct from defensive force. (RJII)

"Free trade is simply trade occuring without coercion." Presumably you mean without illegitimate coercion, since you've just allowed the government to use coercion to prevent some coercion. But if the government may use coercion to prevent murder, why not to prevent say, hunger or child labour? The minute you say the government can do anything in a free market, you break down the (artificial) barrier between the economic and the the political. And with it goes any meaning for an absolutely free market, because it depends on a politically-mediated balance of interests. This is why in the long run successful economies tend to be democratic, because it is the most efficient way of ensuring both the balance of interests and a successful relationship between the economic and the political, and allows countries to strike different bargains (eg Norway/US). Rd232 09:33, 21 Dec 2004 (UTC)

You're not seeing that there are two kinds of force ..coercive and defensive. Defending the free market from initiatory force is not coercion, but defensive force. For example, the person who is trying to steal from you is using the coercion...he's initiating the force..he's the one trying to violate the free market. When you or the government, as your agent, knocks him down to repel him, you're not coercing him, but using force in defense against coercion. Think about it without using the word "coercion" for a minute... There are two kinds of force initiatory and defensive. A free market has no initiatory force. If the government steps in when someone is about to initiate force into the marketplace and repels him, the free market is still in progress...because the government didn't initiate force but responded defensively and counteracted it. (RJII)

Well, that has a certain superficial logic, but if you look deeper there's a can of worms. Coercion is about more than violence - it's about harm generally, including the threat of harm. Hence for example blackmail counts as coercion. But if you admit that, then coercion includes, for instance, exploitation of local monopolies. If I'm the only supplier of water in an area, let's say, then I can choose to charge, say 50% of local average income. Now you could argue that it's still a free market because you can choose to pay that or to go without water and die. But that's Hobson's choice. And as long as the barriers to entry which permit me to charge such prices aren't imposed by violence or by government (i.e. natural monopoly), then it's still a "free market" as normally understood. It comes back to perfect competition - in any other situation, market participants don't participate as equals, which gives some the ability to exploit others (extract economic rent), which is a form of coercion. The point being not that is fundamentally wrong, but that a simple definition using coercion is just that - simplistic. Freedom is not a simple concept; freedom is not (primarily) an economic concept. Rd232 14:33, 21 Dec 2004 (UTC)

That's true that coercion is about more than violence ..it's about the initiation of force whether violent or not. It would also include fraud (theft by deception). But, I think, when you say your water example constitutes coercion, I think you're going beyond the meaning of the word. It may be "exploitation" is some sense of the word but it's not coercion if nothing is done to the guy who wants a drink of water. There is a difference between refraining from assisting the guy by not lowering prices and actually coercing the guy. Also, as you said, one may construe it as a "Hobson's choice" but it actually is a free choice when it comes down to it. It's the guy's own biology that requests that he drink water. It would be a real stretch to say that his freedom is being restricted by his own desire to satisfy his biological urges. There is nothing about a "free market" that should imply what some may subjectively judge to be a "just," "fair," or "perfect" market. It's just one where people aren't subject to initiation of force. Maybe they should be subject to it in some cases ...such as in your water example. That is, maybe a free market isn't good or ideal. Maybe equal unrestricted freedom for all isn't a good thing. (RJII)

"There is a difference between refraining from assisting the guy by not lowering prices and actually coercing the guy." Semantics - you rephrased it from active to passive (from raising prices to not lowering). But substitute "the gun" for "prices" and see how it reads. Rd232 18:34, 21 Dec 2004 (UTC)

I'd say the same thing for raising prices. You aren't doing anything to the guy. The raising and lowering of prices is independent of him....you aren't interacting with him just by raising or lowering prices. (RJII)

Semantics... Guns don't kill (bullets do) - so it's OK to shoot at people, since it's up to them to dodge the bullets. (Yeah, there's a difference, but the point is the line between what's acceptable is not scientifically (or even economically) determined - its socially, ethically, politically determined. Rd232 20:16, 21 Dec 2004 (UTC)

By RJII's argument, erecting bars around someone isn't coercion, because it's the guy's own biology that keeps him from passing through the bars or flying up and over them. It's sophistic nonsense, a word game that tries to avoid the fact that coercion isn't only less coercive by virtue of being done by exploiting biological limitations. And because freedom is so elusive and coercion can come in so many forms, the whole idea of "free" markets is illusory, and can't be the basis of a valid science of economy -- although it acts well as a tool of propaganda, used to justify self-serving policies. -- Jibal 14:29, 16 March 2007 (UTC)

Trying to avoid a formal dispute

Obviously, this anonymous editor is not going to give up on this point. I'd rather not stick a "disputed" tag on an otherwise good article over part of one sentence, edit wars solve nothing, and the only other person who has weighed in is also anonymous. I'd really appreciate some comment on this. I'm going to put a request at Wikipedia:Requests for comment. -- Jmabel | Talk 03:03, Dec 17, 2004 (UTC)

He seems to have a point. Personally, I would be looking at this more in terms of how to better place this information and state it more clearly. - Nat Krause 05:30, 17 Dec 2004 (UTC)

My point, though, is how is this significantly freer than most other markets? Most garage sales are ducking taxation laws: surely the threat (even if rarely executed) of prosecution for participation is not part of the ideal model of the free market. Garage sales aren't exempt from taxation, they are merely in violation of it. -- Jmabel | Talk 07:15, Dec 17, 2004 (UTC)

"Underground" is the wrong word here, since it seems to connote clandestineness. I would prefer "informal". [[User:Poccil|Peter O. (Talk, automation script)]] 08:34, Dec 17, 2004 (UTC)

Certainly less actively misleading... -- Jmabel | Talk 09:09, Dec 17, 2004 (UTC)

It comes down to definitions of freedom. If you define freedom as "freedom from government 'interference'", then the informal economy is freer than the formal one - QED. But most people would say that's a pretty strange (and very American) definition of freedom. See Amartya Sen ("Development as Freedom") and John Rawls. Rd232 21:59, 20 Dec 2004 (UTC)

People have different ideas about freedom, but in the context of the free market, it is reasonably clear. The main intra-concept debate would be the point that Jmabel brings up below: - Nat Krause 03:07, 21 Dec 2004 (UTC)

The issue is that even under a terribly American version of free markets, an ideal free market also assumes total information: awareness by buyers of all possible sellers and vice versa. The garage sale example lacks this completely. I do not see how ducking taxes at a garage sale better approximates the economic ideal of a free market than does a stock exchange, which is subject to taxation but approximates the total availability of equal information. -- Jmabel | Talk 23:51, Dec 20, 2004 (UTC)

Hmm. I'm not sure about your first sentence there. I don't think that the Austrian school model of a free market assumes total information, for one. Hayek &c. tend to see the market as leading to the production of information (via the pricing mechanism) rather than depending upon it. See also Dispersed knowledge in this regard. --FOo 00:04, 21 Dec 2004 (UTC)

The Austrian school addresses a more specific (and more meaningful) issue - what is the best system in the real world for processing economic information about prices, demand/supply etc? The argument is that the market - through its "dispersed knowledge" (today we might use an analogy with distributed computing) - is a better information processing system than central planning. This is a relative argument, and doesn't require the market to perfect, just to be better than alternatives. The way the discussion is phrased here, it's about unattainable ideals. Well if we talk about those, then its basic undergrad economics that perfect competition (the formalization of an ideal free market) requires perfect information. Rd232 09:24, 21 Dec 2004 (UTC)

We clearly are not reaching consensus, and we seem to have a slow motion edit war. RJII has now changed this to "There is no large free market economy in existence other than in the underground economy." RJII: what is your example of a large free market in an underground economy? You are editing without discussing, and unless you can justify what you are saying, I am going to feel very free to revert. -- Jmabel | Talk 07:33, Dec 21, 2004 (UTC)

The underground economy *is* an "example of a large free market." Could be up to a $1 trillion economy according to some estimates. Government is not taking a cut (or otherwise intervening (though it would like to)), and the transactions are voluntary. (RJII)

The underground economy as a whole??? So when a drug dealers and prostitutes bribe policemen that is part of your idea of a free market? Illegal immigrants in sweatshop labor, threatened with deportation if they leave? Loansharking, with the threat of broken knees if you don't pay back? What a lovely ideal free market! These are lesser issues than a sales tax? I repeat my question: what is your example of a large free market in an underground economy? -- Jmabel | Talk 20:57, Dec 21, 2004 (UTC)

"All of the underground economy that consists of trades to which the parties mutually agree and government isn't able to intervene" is my answer to your question. Anyway, there's nothing about a free market that says it has to be ideal (your ideal), good, or preferable. You might not like allowing "trades to which the parties mutually agree and government intervention doesn't occur" but that's just what a free market is. Maybe you have it in your head that a free market is a "fair" or "just" market? That's not necessarily the case. Most people prefer relatively free markets, in accordance to their own tolerance for the freedom of others. (RJII)

Are you saying that a market is "free", despite threats of force, as long as those threats don't come from a government? This is ridiculous. -- Jmabel | Talk 21:33, Dec 21, 2004 (UTC)

No, re-read what I said for the answer to that. Getting someone to "trade" with you by threatening force is not free trade, whether that threat is coming from government or a person. When coercion is involved, it's not a "trade" to which the parties "mutually agree." (RJII)

(I'm picking up this thread below). -- Jmabel | Talk 22:20, Dec 21, 2004 (UTC)

It would be be helpful if people were clear that "free market" is a relative term, there being no absolutely free market except under the trivial definition of a lack of government interference. Rd232 09:24, 21 Dec 2004 (UTC)

It's almost always used as a relative term, at least. And yes, people should recognize that but they usually don't. One of the first objections you hear directed at someone who says he favors free markets is invariably "There's no such thing as a free market." Ridiculously trivial. (RJII)

It's worth making the point that much of this debate arise from the term "free market" itself, which is a very loaded term because it deliberately mixes two sense of freedom - the technical "free" (eg from added preservatives") and the politically "free", which has all sorts of connotations. So it's deliberately built into the term that in any given situation people will be on the back foot arguing against a "freer" market, because who could possibly be against that? Whereas if we spoke more neutrally of a more or less regulated market, or in terms of various economic criteria of how well a market functions (of which "freedom from unnecessary government interference" and "freedom from corruption" are but two aspects), it's quite a different context. In general, the term "free" market elevates one aspect of markets over all others for ideological reasons. Rd232 09:45, 21 Dec 2004 (UTC)

Let me try this from another angle. My model of a rather free, aboveground market would be exchange of U.S. dollars for Euros. To what extent is that not a free market? -- Jmabel | Talk 21:02, Dec 21, 2004 (UTC)

Well, according to the idealized definition in the article, it's a truly free market transaction only when government isn't able to take a cut of the capital gain when you sell the Euros at a higher price. Currency trading does indeed take place in the underground economy to avoid this intervention. (RJII)

Picking up thread: It seems to me that the disagreement I'm having with RJII comes down to this: he seems to be almost entirely focused on one way in which markets may be unfree -- taxation -- and I feel that other factors may often be far more important in distorting a market away from an economist's model of a free market. I think that the right to take this up in the article is to discuss various factors that make markets deviate from the ideal model. I believe it is little more than minarchist political polemic to focus entirely on this one factor. I also believe that governments (and other institutions such as stock exchanges) can facilitate free markets (both by preventing fraud and thereby removing a major risk of participating in such markets and by making it easier for buyers and sellers to find one another) as well as interfere in them detrimentally. I don't think that a throwaway remark suggesting that underground markets are somehow freer illuminates anything: I give several examples above of ways that underground markets may be highly subject to coercion. -- Jmabel | Talk 22:20, Dec 21, 2004 (UTC)

"Informal" vs. "underground"

Can we at least agree that we are talking here about informal markets, ones that are basically tolerated though not strictly legal, rather than underground markets, ones that are specifically clandestine? That would reduce the disagreement, from my side at least. -- Jmabel | Talk 21:36, Dec 21, 2004 (UTC)

But even these trades that are "tolerated" are only so because it's too impractical or difficult for government to intervene --the rest of them are not stopped or taxed because government hasn't managed to find them. "Underground economy" is even the term used by government (including the IRS) to describe this economy that is "under the rader," so to speak. And they're not referring to coercive activities, but simply trades from which, for various reasons, they aren't able to tax. Are the coercive activities on the part of individuals that you speak of part of the "underground economy" anymore than they're part of the "aboveground economy"? Is coercion between individuals an "underground" activity? Maybe, but then that's just because it's legally prohibited, but I'm hesitant to say it's part of the underground economy... because again, "underground economy" typically isn't referring to activities such as holding a gun to someone's head and demanding his money, for example. It's just referring to trade that the goverment isn't able to tax. And, the whole of these trades which are devoid of coercion meets the criteria of a free market as posited by the definition in the article. (RJII)

The free market is a mathmatical construct that does not exist in reality, underground or otherwise. The construct gets perturbed by transaction and information costs, imperfections and inequalities. Markets are natural phenomena that occur under certain social conditions that have been worthwhile studying mathmatically, thus we get the useful abstractions studied in field of micro-economics. I tend to think the statement that underground economies are the only truly free ones is a bit much.--Silverback 03:50, 22 Dec 2004 (UTC)

Where is the "level playing field" in the underground economy? Because it is "underground", information about prices and product quality is more expensive and unequally distributed, it has a difficult time competing with the overt economy where the overt economy is allowed to compete, despite the disadvantages the overt economy has in taxation and regulation. Where it does compete with the overt economy it is only in those areas where the taxation and regulation burden is so high that the advantages are obvious, such as tax free cigarettes, or easily evaluated post-paid services such as lawn mowing, where overt economy goods and services are so overpriced.--Silverback 05:33, 22 Dec 2004 (UTC)

My "level playing field" idea was supposed to be accompanied by the caveat that players may have very differing skills and endowments; but I forgot and went to bed. I highlight a phrase I'm removing "A level playing field is defined as one where no player is allowed more liberty than any other player." as beautifully illustrating what happens when you take the idea of a "free market" ad absurdum. The sentence could equally well (probably better) describe socialism. Note also that the "contract enforcement" part of the intro tends to imply perfect contracts, since otherwise value judgements will need to be made by judges, which probably shades into what RJII considers (or at least repeatedly defines as) government coercion. Rd232 09:40, 22 Dec 2004 (UTC)

For once, Silverback and I seem to agree. But I'm not sure either of us have the patience to keep reverting RJII, who seems to prefer inserting his/her somewhat idiosyncratic views into the article, with or without consensus, rather than discuss the matter. -- Jmabel | Talk 07:14, Dec 22, 2004 (UTC)

He also seems to insist on viewing government in a feudal way (hence going on about coercion) instead of in the modern social contract sense. Hence my my attempt to NPOV this by putting it in game theory terms. Rd232 16:45, 22 Dec 2004 (UTC)

The "contract" erodes when the courts and police are lawless and let erosive precedents propagate like computer viruses. Super majority protections of the rights of individuals and minorities have gone out the window. It is still coercive. What RJII doesn't get is that, if so motivated, the government can actually take steps that lower information and transaction costs and correct for externalities.--Silverback 17:06, 22 Dec 2004 (UTC)

Not really sure what you're saying, but I'll say that if coercion exists, then it's not a free market. (RJII)

I'll go even further, if a market exists, it is not a free market. A "free market" is a mathmatical abstraction, which is why the underground market does not cut it either, it has transanction and information costs and externalities, like any other.--Silverback 18:46, 22 Dec 2004 (UTC)

The game section is ok with me. But, the point is, a free market doesn't really have anything to do with government. It's just a market where coercion isn't occuring. If there is a government, then it can't coerce either. (We're talking about a truly free market) Anarcho-capitalists, for example, believe in an overseer in the form of a business rather than government, so that it is funded by free market transactions, rather than taxation. A free market is just that ...a market where everyone is "free." (RJII)

"a free market doesn't really have anything to do with government". But property rights and contracts do not enforce themselves. I know of no examples of anarcho-capitalism. Nor is it clear to me that such taxation-less funding of government function is possible without corrupting the market. When a central bank sets interest rates, that's interest rate/exchange rate policy. When it buys and sells currencies, that's called market intervention. In any case, anarcho-capitalism is a tiny minority view and should not overwhelm NPOV in the introduction, which is what, RJII, you are doing. Rd232 17:11, 22 Dec 2004 (UTC)

But you have to keep in mind that we're talking about an ideal ..a free market. Sure, it seems unlikely that without a government people are going to freely trade for all eternity. Surely, someone will come along decide to coerce someone else. But it's not logically necessary for a government, or any other kind of overseer, to exist in order that people freely trade with each other. Establishing a government may just be a prudent thing to do given the human inclination to coerce his fellow man. Again, a free market is just one where people are trading without coercion intervening in the process. (RJII) (By the way, I obviously didn't inject anarcho-capitalism into the definition...i don't know how you come to that conclusion. I just brought it up to you to try to explain something). (RJII)

You can perfectly well have trading without coercion and without government in the modern sense; it just doesn't sound like a "free market". See eg Marcel Mauss' The Gift. ... You defend what I see as the anarcho-capitalist position of making it all about coercion. Rd232 18:14, 22 Dec 2004 (UTC)

"Contract" section was kind of pointless. A free market includes other economic freedoms besides having to do with contracts. (RJII)

Markets are fundamentally about contracts, implicit and explicit. Where goods are standardised, price may be the overwhelmingly most important element of the contract, but it is never the only element ("pig in a poke"). Put another way, name an economic freedom which has nothing to do with contracts. Rd232 15:48, 23 Dec 2004 (UTC)

Please stop trying to make the intro fit your POV. The article is quite long enough to accomodate a discussion of your arguments; the intro should be short and neutral. An equation of the idea that "an economy exists in a social context" with a "command economy" is plain, outright, irredeemably dumb. (We all do dumb things from time to time; let's everyone try and keep it to a minimum.) Rd232 15:48, 23 Dec 2004 (UTC)

I'm not trying to inject my bias into the intro but trying to make the intro neutral ,correct, and clear. Can you or anyone explain what is meant by an economy that exists in a social context? what does that mean? (RJII) 23 Dec

yeah, that's what i thought. (RJII) 26 Dec

I actually wrote a reply, but Wikipedia swallowed it (as it has several other things of mine recently when editing parts of a page), and I couldn't be arsed to repeat it. Try looking up social capital and sociology. Rd232 23:16, 26 Dec 2004 (UTC)

I don't feel like writing on this at length -- frankly, I've given up for now on turning this into an evenhanded article -- but here is a short version.

Like all human institutions, markets exist in a social context. In any given society there are not only laws but social norms determining what may be exchanged for money: for example, in medieval Europe, it was extremely exceptional (and often though disgraceful) to exchange land for money. Until slavery was abolished in the U.S., the market in slaves was a major factor in the U.S. economy; obviously, at this time, there would be almost universal condemnation of all trafficking in human beings.

More subtly, the very ability to meaningfully own property is dependent on society. In traditional societies with no formal notion of ownership, it is generally almost impossible to own something one does not directly use. For example, the abstract notion of ownership involved in stock shares -- or even bank deposits -- requires a very sophisticated set of social constructs going way beyond the individuals directly involved in the transaction. It involves both a social and a governmental notion of a very abstract concept of ownership.

I could (honestly) go on about this at much greater length, but is this enough to give you some sense of the meaning of that phrase? -- Jmabel | Talk 06:57, Dec 27, 2004 (UTC)

It does, thanks. But the writer was differentiating free markets from ones that "exist in a social context." What about a free market is not in a "social context"? (RJII) Dec 27

Free markets do not exist. Real markets are constrained and enabled by the fact they exist in a social context. See eg http://www.pubchoicesoc.org/papers/Berggren-Jordahl.pdf.