What Libertarians Mean By “The Free Market”: My Two Cents

From  Libertarianism.org, via Cato.org

I’ll just add my two cents to this:¬†

Aaron Ross Powell of Libertarianism.org addresses a major misapprehension: Markets are not just big corporations. When I think about market activities, I always first think of ordinary people making the most of their limited resources. I think of larger companies, state-enforced limitations on liability aside, mainly as groups of more-or-less ordinary people organizing their resources in more complicated ways.

One of the more frequent errors I encounter among critics of markets is their misapprehension that everything any private business does is, by definition, a market activity. Under this definition, factories dumping chemicals into rivers becomes a “market activity”. Overthrowing third-world governments and instituting banana republics becomes a “market activity”. Enron-style fraud becomes a “market activity”. Little wonder, then, that these critics distrust “markets”. From my libertarian point of view, these are not market activities because not all involved parties consent to participate in them. The primary indicium of a market activity is mutual consent, not the parties’ status as private.

Here is a video that I believe properly distinguishes market activity from non-market activity:

I imagine that many anticapitalists would criticize what’s happening here as free markets run wild, but I see it differently. Right off the bat, the author identifies the World Bank as the source of the money that sets this scenario in motion. The World Bank is an organization of governments that acquire their money either through forceful taxation or forceful monopolization of their nations’ monetary systems. I don’t consider these to be market activities, and that is only the beginning of the video. The “mutant” form of capitalism that the author describes is rife with involuntary transfers of wealth and privilege.

Not so fast. Markets are not totally "free". There are some rules, here.

Not so fast. Markets are not totally “free”. There are some rules, here.

Lastly, at least one critic with whom I’ve spoken about markets has objected to the use of the word “free” as a misleading descriptor. He has a good point. That poor workers on the market in, say, Bangladesh have a “free” choice between sweatshop conditions in unsafe buildings on one hand and prostitution on the other arguably reflects poorly on “freedom”. The “freedom” to work in safe, comfortable, air-conditioned offices is not available to many people there.

Of course, all participants in the market are, to some degree, constrained by scarcity, circumstance, and property rights. When libertarians use the word “free” to describe markets, they are describing the interpersonal relationship of traders within the confines of a more-or-less Lockean scheme of property rights. The traders are “free” to negotiate, so long as these negotiations do not violate the aforementioned strictures of private property. I’ve tended of late to drop the word “free” when describing markets in recognition of these strictures. I’d rather stress the structure and confines of market activities than leave the impression that market participants are “free” to do as they please.

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