Question

What value is there in free markets? What are the downsides of free markets? What are the alternatives to free markets? How do the outcomes differ between free market and non-free market countries? Why do we have to choose between free markets and the alternative?

Answer 1

In economics, a free market is a system in which the prices for goods and services are self-regulated by the open market and by consumers. In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority and from all forms of economic privilege, monopolies and artificial scarcities.Proponents of the concept of free market contrast it with a regulated market in which a government intervenes in supply and demand through various methods such as tariffs used to restrict trade and to protect the local economy. In an idealized free-market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.

For economic systems coordinated either by free markets or by regulated markets, see Market economy.

"Free enterprise" redirects here. For other uses, see Free enterprise

A free market economy promotes the production and sale of goods and services, with little to no control or involvement from any central government agency. Instead of government-enforced price controls, a free market economy allows the relationships between product supply and consumer demand to dictate prices. The lack of government control allows free market economies a wide range of freedoms, but these also come with some distinct drawbacks.

The downsides of free markets

downsides: Limited Product Ranges

Sine businesses are free to pursue profit in whatever way they please, goods and services that are not profitable generally will not be produced. This can limit the range of goods on offer to consumers and may impact certain groups of consumers more than others. For example, if it is too expensive to ship goods to, or open services in, rural communities then services may be withdrawn and these communities will miss out.

downsides: Dangers of Profit Motive

The primary objective for any company in a free market economy is to make a profit. In many cases, companies may sacrifice worker safety, environmental standards and ethical behavior to achieve those profits. The early 2000s saw such unethical behavior run rampant at companies such as Enron and WorldCom. The Deepwater Horizon oil spill in 2010, one of the largest environmental disasters in U.S. history, was largely attributable to the use of substandard cement and other cost-cutting measures.

downsides: Market Failures

When a free market economy spins out of control, the consequences can be severe. From the Great Depression of the 1930s to the real estate market crash of 2008, market failures have devastated the lives of millions in lost income, unemployment and homelessness. Many of these failures have stemmed from those seeking short-term profits over slow and steady gains, usually aided by loose credit, highly-leveraged assets and minimal government intervention

The alternatives to free markets... "A pandemic is no time for bad governance. As the COVID-19 crisis intensified, bureaucrats and elected officials slumbered. Government regulations prevented many in the private sector from helping with response efforts. The result was a sudden surge of evasive entrepreneurialism and technological civil disobedience. With institutions and policies collapsing around them, many people took advantage of cutting‐​edge technological capabilities to evade public policies that were preventing practical solutions from emerging.

Examples were everywhere. Distilleries started producing hand sanitizers to address shortages while average folks began sharing do‐​it‐​yourself sanitizer recipes online. The Food and Drug Administration (FDA) looked to modify hand sanitizer guidelines quickly to allow for it, but few really cared because those rules weren’t going to stop them. Gray markets in face masks, medical face shields, and respirators developed. Some people and organizations worked together to make medical devices using off‐​the‐​shelf hardware and open source software. More simply, others just fired up sewing machines to make masks—and then, faced with an emerging public health consensus, the guidance from the federal government shifted dramatically: where formerly ordinary people were instructed not to buy or use masks, within a matter of days, the policy reversed, and all were encouraged to make and use cloth protective masks.

Meanwhile, doctors and nurses started “writing the playbook for treating coronavirus patients on the fly” by improvising treatments and then sharing them on social media. A few doctors even converted breathing machines to ventilators themselves using 3-D printed parts to address shortages for their patients even though the FDA had not yet authorized it.

Social media sites were also suddenly filled with discussions about how average people might come together to build tools or share information to assist with virus testing or treatments. A 17‐​year‐​old used his coding skills to build one of the most popular coronavirus‐​tracking websites in the world (ncov2019.live) after noticing how hard it was to use government sites. And two high school science teachers in Tennessee set up testing operations in their school lab to help reduce testing time in their area

Difference between free market and non-free market

The term “capitalism” is so confounded. So many people mean so many different things by it, that using it all by itself pretty much guarantees that you will be talking past one another. Some people believe that Marx had an image of a weird form of “capitalism” (e.g., mercantilism) that even most proponents of capitalism today also reject (but for quite different reasons

Free-market economy refers to an economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets, private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights.

Welfare capitalism refers to a capitalist economy that includes public policies favoring extensive provisions for social welfare services. The economic mechanism involves a free market and the predominance of privately owned enterprises in the economy, but public provision of universal welfare services aimed at enhancing individual autonomy and maximizing equality. Examples of contemporary welfare capitalism include the Nordic model of capitalism predominant in Northern Europe.

This model was implemented by Alfred Müller-Armack and Ludwig Erhard after World War II in West Germany. The social market economic model (sometimes called Rhine capitalism) is based upon the idea of realizing the benefits of a free-market economy, especially economic performance and high supply of goods while avoiding disadvantages such as market failure, destructive competition, concentration of economic power and the socially harmful effects of market processes. The aim of the social market economy is to realize greatest prosperity combined with best possible social security. One difference from the free market economy is that the state is not passive, but instead takes active regulatory measures. The social policy objectives include employment, housing and education policies, as well as a socio-politically motivated balancing of the distribution of income growth. Characteristics of social market economies are a strong competition policy and a contractionary monetary policy. The philosophical background is neoliberalism or ordoliberalism.[