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Comment by clarkmoody | Hacker News Reader

The term "free market" is thrown around rather easily in this article, oftentimes with the assumption that consumers have absolutely no recourse in said "free market." A few places, you could replace "free market" with "freedom of speech" and it would read the same. Of course the "progressive" thing to do is to limit speech as well, for our own good.

When an economy has a strong central bank meddling with the interest rates, firms and individuals receive an incorrect signal in the time-preference for money, since the interest rates are not determined by the market. Coupled with an inflationary monetary regime and Keynesian ideology throughout, the "free market" has no chance to produce optimal outcomes.

Come back with a book that examines actual free markets and we'll talk.

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Right? Any time something in the economy goes wrong, people are quick to blame it on the free market. Greed is the problem, they say. If, in fact, that problem is caused by the government, then it is the fault of "corporations meddling with government." If it is clear that a handful of politicians caused the problem, then people call for "getting money out of politics." It's almost as if the government can do no wrong.

We live in such a highly regulated world that I can't help but chuckle when someone blames the "free market" for many of the problems of today.

Right? Any time something in the public sector goes wrong, people are quick to blame it on the government. Greed is the problem, they say. If, in fact, that problem is caused by the market, then it is the fault of "government meddling with economy." If it is clear that a handful of businessmen caused the problem, then people call for "getting government out of our personal lives." It's almost as if the free market can do no wrong.

We live in such a bought-and-paid-for world that I can't help but chuckle when someone blames the "government" for many of the problems of today.

Any time something in the public sector goes wrong, people are quick to blame it on the government.

This is a tautology.

No it's not. Please do not be disingenuous and more importantly don't give one line wrong-by-fallacy statements.

Why can't both be true? Regulation is equally problematic as free markets.

>A few places, you could replace "free market" with "freedom of speech"

Interestingly, from a legal perspective free speech does go hand in hand with what the Court's call the market place of ideas[1] which generally should act like the free market.

"The marketplace of ideas is a rationale for freedom of expression based on an analogy to the economic concept of a free market. The "marketplace of ideas" holds that the truth will emerge from the competition of ideas in free, transparent public discourse."

[1] https://en.wikipedia.org/wiki/Marketplace_of_ideas

>Come back with a book that examines actual free markets and we'll talk.

Do you have any examples of "actual" free markets?

Part of that would be no protectionism. I seriously doubt that most in the HN community are big fans of e.g. the H-1B visa program. And yet a free market would not have an H-1B program because in such a market anyone anywhere would be hireable strictly upon the discretion of the employer. The H-1B program itself is an intervention.

The reality is that you cannot have completely free markets in a democracy. As soon as a signifcant minority (let alone majority) do not like the market's outcome, they will petition a legislative alternative to that outcome. So of course there's going to be a hybrid system. Is there any 1st world country with a less interventionist government in economics than the U.S.? There are plenty of 3rd world countries where there's no regulation at all, I don't see entrepreneurship flourishing there, rather it's exploitation, and might makes right.

>As soon as a signifcant minority (let alone majority) do not like the market's outcome, they will petition a legislative alternative to that outcome.

But that presupposes that the populous would dislike the free market's outcome, which if anything points to the idea that free markets are unworkable in a practical sense.

Nope. The 2 countries (microstates?) that are often touted as free-markets are Hong Kong SAR and Singapore.

Hong Kong, which is widely applauded by neo-Liberal economist Milton Friedman for it's low taxation and hands off regulation, has a hidden secret, they raise most of their revenue from land leases. To clarify, in Hong Kong the only piece of freehold land belongs to Saint John's Cathedral.

> Article 7 of the Basic Law of the Hong Kong Special Administrative Region (HKSAR) stipulates that the land and natural resources within HKSAR shall be state property.

Same goes for Singapore, they meddle continuously in the real estate economy through the HDB. Ethnic quotas in state owned buildings ensure Singapore's racial harmony.

It's questionable whether either country could survive without their neighbors (China and Malaysia) whom they import most of their goods from.

Probably the closest measure is the Index of Economic Freedom, with the caveat that the ranking method is imprecise: https://en.wikipedia.org/wiki/Index_of_Economic_Freedom

Interestingly, Denmark and Canada surpass the United States, according to the IEF. I was aware the former has the least regulated banking sector, but not much beyond that.

In a completely free market, by what mechanism does a consumer have recourse?

A free market implies that supply and demand are reached naturally without intervention by government: either in fixing prices, setting quotas, or giving special consideration to some firms over others.

The term "free market" does not imply that there are not courts of law or private property rights. Perhaps too many think "anarchy" when they read "free market."

The argument in the book under discussion is that the natural balance of supply and demand is favoring the seller, who is exploiting the buyer in ways the buy isn't aware of, and is complex and fast enough that a regulatory paradigm can't mitigate.

A "free market" is an attempt to simulate a perfect market, which is a theoretical construct that doesn't exist. One of the things it requires is perfect information among all parties in the buy and sell process. Courts and property rights are one way of trying to simulate that perfect market, and thereby create a free market. But this isn't actually working well enough, is the book's argument, there's still an imbalance that favors exploiters, i.e. the free market isn't providing enough information for buyers to make properly informed decisions rather than manipulated ones.

Free markets don't require perfect information, I'm not sure where you came up with that. Perfect information is an assumption used in general equilibrium models, that's really it.

I think you might have meant perfect competition. Free markets don't need perfect competition, either. That's just a neoclassical assumption, again for modeling convenience.

> The term "free market" does not imply that there are not courts of law or private property rights.

Courts of law don't provide any recourse for abuses in trade unless there are laws regulating trade.

Courts can recognize violations of private property rights without regulating trade...

> Courts can recognize violations of private property rights without regulating trade...

Which certainly addresses things like conversion (the civil parallel to theft), but doesn't address consumer recourse, which is what was asked about and is expressly about trade.

Q: What does the completely free market say about the practice of adding melamine to food to increase protein contents?

A: A completely free market would not require food labelling, meaning that protein contents would be unrecorded. Therefore, there would be no point in adding melamine.

Q: What does the free market say about the addition of fillers such as sawdust to food?

A: If such fillers are in such quantity as to affect the quality of the food, the food product will command a lower price in relation to other, higher quality products. If not, well, no harm, no foul.

Q: What if there are no higher quality products? What if the manufacturers collude, implicitly or explicitly, or if the costs required to enter the market prevent competition?

A: The market will adapt to use other products. Too much sawdust in your bread? Eat cake.

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