The Meaning of a Free Market

There’s something that’s always bothered me about the concept of a free market, and I suspect it bothers others too. A free market is supposed to allow the free interactions of its many participants. Intervention by the state is exactly what doesn’t happen in a free market, by definition.

But the state is composed of people too. It’s an organization – a unique one, for sure, but an organization nonetheless. Why treat it as something extraneous to the market, imposing on it from without? Why not consider state regulations of the market to be just the contributions of one of many market actors in a free market? Isn’t the state/market distinction ultimately arbitrary? What, in principle, is so different about the state?

Behind these questions lies an important insight into how to best bring about the emergence of a truly free market.

 

Let’s first imagine that a free market is simply everyone doing whatever they choose.  Of course, this doesn’t mean everyone has unlimited options. Each person’s actions will impose constraints on the actions of everyone else. I cannot, for example, buy eggs if no one around me sells eggs. These inevitable constraints aside, let’s not stipulate any other limitations.

This scenario is “free market” at its extreme: it lets the “free it all!” disposition run full throttle to its logical endpoint.

Notice that this state of affairs is what we already have. Everyone – including all market actors, including the state – is already doing whatever they choose within the constraints imposed by the actions of others. Yet this obviously doesn’t yield a maximally free society. Having no constraints whatsoever does not result in a situation in which individuals have as many actions available to them as possible. In this way, unqualified and universalized freedom is self-defeating.

A tempting and common solution is to stipulate a ban on the initiation of force. Free markets are markets in which the market’s participants do not use force to compel others. After all, if someone is forced to do something, they can hardly be said to freely participate in the market. So once we allow force into the picture, the market is no longer free.

There are two problems with this. One is that people sometimes freely choose to initiate force. Force must be used to stop those people from doing so.

We can argue that that second use of force should be considered “third party self-defense” and not really force, because it is not an initiation of force, but rather a response to it. This opens the question of who is to decide what counts and doesn’t count as force. Would it be an agency or a series of agencies? What if these agencies disagree with each other, or with a large number of people? Could these agencies use “third party self-defense” to enforce their interpretation on the mass of society? The moment we create distinctions in what we mean by “force,” a semantic can of worms opens up that there is no obvious and mutually agreed upon way to close.

The second problem is the idea that when people are forced to do something, they are not really free. As pointed out with the eggs example, people are always free within the constraints set up by what other people do. No initiation of force is required for there to be options that are unavailable to me. This means that the justification for disqualifying initiation of force from the free market cannot be that it creates limitations on the freedom of the recipients of the force. These kinds of limitations exist with or without force.

 

A useful and not self-defeating conception of the “free market” requires two (admittedly non-trivial) assumptions:

  • Monopolies do not arise without the use of force; and
  • Even with the use of force, monopolies cannot be sustained unless they are legitimized.

It’s outside my scope to defend those views here. A defense of the first is given here, and of the second here. For my present purposes here, I wish only to emphasize that by legitimacy I mean the sense by the majority of society of something being real, normal, necessary, and inescapable.

If we accept the two assumptions, we can define a free market as what emerges out of the free interactions of a group of people who, by and large, do not consider violently supported monopolies to be legitimate.

Under this conception, members of a free market can do whatever they choose, without restrictions besides those imposed by the actions of others. They can even initiate force – certainly some people would. Without question, agencies would pop up that use force to stop those who would initiate it. These agencies might disagree with each other, and with many people. They could try to use force to enforce their vision on the mass of people. But here’s the key difference: they wouldn’t be able to do it without consolidating the support, or at least acquiescence, of a critical mass of people. And, by the definition of free market we’re working with, people wouldn’t fall for it. They would be free to accept it, but would choose not to. They would consider it illegitimate in the four ways listed above. Such an attempt could, therefore, never be sustained.

The emphasis on monopolies might seem odd here. However, it is essential. Some use of force is always necessary, and reaching agreement on what counts as legitimate force is messy for the reasons listed above. Healthy and prevalent competition is the best possible check on potential abuses by those agencies that need to deal in force.

 

This conception of a free market might seem to require some fundamental shift in human nature. Not at all. Nothing about people has to change, other than their sense of the legitimacy of violently supported monopolies.

It could be objected that even this small change demands too much. A free market should work for any type of people. But it is obvious that people, as they already are, behave precisely as they do now – including in ways that generate an intrusive and violent state. What we have today is what a market of the freely acting people of today looks like. There is no sense in hoping to impose a free market on today’s people if they’re not already generating it. This is why the “legitimacy” part of the definition is also essential – we cannot simply ban monopoly as if from without.

Society will always look the way that the sum actors of society make it look. A society made up of those who make it up today will always look the way that society looks today. Not with political change, nor with revolution, can you make a society not perfectly reflect its constituent parts. A change in society must require some change in its people.

 

This conception of a free market suggests a change in how we strive toward liberation here and now. Those of us who would fight for liberty should spend less energy combating those institutions that seem to impose their visions on the market from without. They do not impose from without but from within. This means that we should instead focus our energies on spreading an attitude that de-legitimizes the existence of violently supported monopoly.

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