What is a Free Market?

[serenity now]

First let me state that I have yet to have any economics class (and won't), so I'm talking in rudimentary, colloquial terms here. It is likely that I am mistaken on certain concepts; don't hesitate to correct me!

My main question is what the definition of a true free market is, and my second question is whether one can actually exist in the real world. From what I understand, a free market is some combination of a market free of government regulation, as well as one allowing for participation by a wide variety of enterprises and industries. Basically that anyone can compete in a truly free market. Not necessarily succeed, but compete.

The problem with this definition is that these two aspects are mutually exclusive. If you remove regulation, the market will quickly fall under the power of an unelected oligarchy of the top percentage of entrepreneurs who are able to easily crush or buy out any up-and-coming competition. We see a lot of this already with our current model. A certain amount of regulation seems to be necessary to maintain some level of fairness in the playing field. But can a regulated market be truly free?

Or is a truly free market just a theoretical ideal; a concept by which to measure the freeness of any current model, but never expected to be exactly replicated itself?

 

[Ishraqiyun]

The problem with this definition is that these two aspects are mutually exclusive

I think you are onto something here.

 

[SoldierOfTheKing]

There has never been a purely free market, because all government activity has some effect on the market. Likewise no economic system has ever been purely socialist. It's about the relative amount free enterprise.

The problem with this definition is that these two aspects are mutually exclusive. If you remove regulation, the market will quickly fall under the power of an unelected oligarchy of the top percentage of entrepreneurs who are able to easily crush or buy out any up-and-coming competition.

Depends on the industry. In industries with economies of scale, where larger, more centralized enterprises are more efficient, then yes, this can happen. I'd drop the word "easily", though. It's a continuous struggle to maintain dominance over the market like that. It requires pricing well below the levels that maximize profits, and buy out everyone that tries to compete with can turn out to be quite expensive. John D. Rockefeller, when he controlled the U.S. oil market, was constantly fighting against independents who tried to compete with him.
Of course when a company becomes large enough, it can lobby the the government for regulations that are favorable to its success, so that's another thing to consider.

 

[jgarden]

According to John D. Rockefeller, Sr., "Competition is a sin!"

The ultimate goal of capitalism is not to create "free markets," but to restrict competition and impose a "monopoly!"

US Monopolies
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Microsoft (Bill Gates) - settled anti-trust litigation in the U.S. in 2001
- fined by the European Commission in 2004 for 497 million euros, upheld for the most part by the Court of First Instance of the European Communities in 2007
America's 19thC Railroads (Commodore Vanderbilt, Jay Gould)
Standard Oil (John D. Rockefeller Sr.) - broken up in 1911, two of its surviving companies include ExxonMobil and the Chevron Corporation.
U.S. Steel - prosecuted for anti-trust in 1911.
Major League Baseball - escaped U.S. anti-trust litigation in 1922
United Aircraft and Transport Corporation - forced to divest itself of airlines in 1934.
National Football League - escaped anti-trust lawsuit in the 1960s, convicted of being an illegal monopoly in the 1980s.
American Telephone & Telegraph - broken up in 1984.
De Beers - settled charges of price fixing diamonds in the 2000s.
Monsanto -control 70% -100% of the commercial seed market; sued by competitors for anti-trust and monopolistic practices

http://en.wikipedia.org/wiki/Monopoly

 

[chris4243]

A free market is where infinitely many competitors produce infinitely many brands of identical goods, which are sold to perfectly informed customers, and all transactions are voluntary. Even this model has problems because it will overproduce things like cigarettes (since there is no mechanism for the people who have to smell the smoker to have any say in the transaction), and underproduce things like education (which lower crime rates) because the people who benefit indirectly don't have to help subsidize it. Also under this model there would be no advertizing, since consumers are already informed about all products.