The myth of the free market

These days there is a great debate going on as to how much influence the government should have on the economy. Many of the debaters are of the opinion that an entirely free market is the best option for america and the world. This simply is not true.

The idea of the free market is based on the fact that, under the right set of circumstances, market forces do eventually push suppliers and demanders to an equilibrium price at which optimal output is achieved. This is true. The problem is that that right set of circumstances rarely, if ever, occurs. This is due to the fact that some of the circumstances, such as consumers and suppliers having perfect information (i.e. having a full understanding of the circumstances surrounding any transaction), there having to be no externalities (side-effects) that result from any transaction, and that all of the suppliers must be price-takers and not price-makers (i.e. be firms that are too small to dictate the price of a good in a market on their own), are nearly unachievable in this modern world of mis-information, pollution, and big business.

My point is not that there is anything wrong with the free market, in theory it is ideal, my point is that free markets do not, and cannot, really exist. Therefore, the idea of conducting business in a market based on the assumption that the market is a free market is ludicrous. Acting as though free markets exist leads to the exploitation of consumers, workers, and the environment in the name of profits. In other words, it leads us to exactly where we are today.

This is not to say that government intervention is the answer to all of our problems but it is to say that some government intervention in markets like ours, markets in which many of the necessary circumstances of free market economics do not exist, is a good idea. At some point, hopefully soon (as in during this administration's lifetime), the policy makers, which in reality are not necessarily all elected officials, in this country need to ensure that guide lines, which make it so that businesses cannot operate on free market principles are set up. Again, I am not calling for socialism but I am calling for the reining in of some of our free-wheeling economic principles.