"Free Market" does not and should not imply zero regulation. By and large, we have a free market economy now. Private citizens own the means of production, and they make decisions based on changing market conditions. They are not compelled to produce or to sell against their will.
For the most part, prices are controlled by market forces. Sellers offer their products at a price that they choose, and buyers make individual decisions as to whether or not they find the price reasonable. If the price is too high and there are not enough buyers, the seller must drop his price to move his inventory. If he cannot make a profit at a price the market will bear, the business will fail. If market demand allows for a high profit margin, competitors will soon appear, and the supply will increase until prices are driven down to the minimum needed to keep companies profitable. If supply exceeds demand, the least efficient businesses will fail, leaving only the best to service their market.
The bottom line, if you will excuse the expression, is that millions of people make decisions based on their individual circumstances, and the market adjusts itself to changing demands. Command economies are not capable of reacting as quickly or efficiently.
A proper explanation can not be given in this message format. I recommend that you locate a copy of "Free To Choose" by Milton Friedman.
From Wikipedia:
According to The Economist, Friedman "was the most influential economist of the second half of the 20th century…possibly of all of it". Former Federal Reserve Board chairman Alan Greenspan stated, "There are very few people over the generations who have ideas that are sufficiently original to materially alter the direction of civilization. Milton is one of those very few people."
In his 1962 book Capitalism and Freedom, Friedman advocated minimizing the role of government in a free market as a means of creating political and social freedom. In his 1980 television series Free to Choose, Friedman explained his view of how free markets work, emphasizing his conviction that free markets have been shown to solve social and political problems that other systems have failed to address adequately. His books and columns for Newsweek were widely read and even circulated underground behind the Iron Curtain....
...In 1976, Friedman won the Nobel Memorial Prize in Economic Sciences "for his achievements in the fields of consumption analysis, monetary history and theory and for his demonstration of the complexity of stabilization policy".
Complete Article:
view linkIt's probably safe to say the Milton Friedman knew more about economics than all the members of this Group combined.
