I think this highlights an oft-missed point. There is no such thing as a free market without government intervention. Left to their own devices, traders will always try to game the market to their own advantage.
First, if you look hard enough, you can see traces of the hand of government in almost anything on earth, including any market.
In practice, government meddling is a matter of degree and kind. The dose makes the poison. There are some markets that are free enough of interference that we can fruitfully analyze them as 'free' markets.
Second, what do you mean by 'try to game the market'? In general, markets are sustainable in the long run without government interference (and usually actually more stable this way).
Interactions in markets often behave like the famous Prisoner's Dilemma. So, yes, for a single interaction it's profitable to cheat the other guy, but repeated interactions tend very strongly towards cooperation.
Even Adam Smith recognised the need for government regulation to ensure that markets remain free.
Edit: I think you may have misread my comment; I wasn't claiming that there is no such thing as a market without government interference (though that is probably mostly true). I was claiming that a market cannot be free without government regulating it to keep it free.
Markets are more robust than you give them credit for.
One argument is that rather often governments themselves are trying to monopolize markets with all their regulatory might, but grey and black markets usually spring up rather quickly.
Trying to monopolize a market as a private participant (even a big one) without the government on your side is even harder.
I do agree that monopolies are an important consideration when designing regulation. But mostly in the sense that your regulation has to be careful to avoid supporting monopolies. Especially barriers to entry are often overlooked.
For example, regardless of content, complexity of regulation itself can be a barrier to entry. Compliance takes a lot of lawyers and accountants. (Eg most agricultural subsidies around the world go to really big farms. And financial regulation's complexity essentially forces banks to become big.)
If regulators were really interested in combatting monopolies, there are a few straightforward strategies to try first:
* Encourage foreign competitors to enter domestic markets
* Encourage companies from different industries to branch out (eg Walmart tried to offer banking services a while ago. Lobbying by banks kept that competition at bay.)
* Encourage start-ups. (This is much harder for governments than the first two points. One way to encourage start-ups is via simplifying regulations. But there are lots of other popular ways that don't work well. See eg all the government funding available for tech startups in Europe that sadly doesn't seem to produce much by and large; but it feels good to hand out money.)
> In general, markets are sustainable in the long run without government interference (and usually actually more stable this way).
With the market, you don't even have to look very hard. Many people like to believe that the market is self-regulating and "natural," but that's not the case. It was created via government policy (hundreds of years ago), and depends on government in such fundamental ways that it's inseparable from it.
The market would destroy itself (and much else) without government interference, and to claim otherwise is akin to denying the mountain because you're standing on top of it.
1) The "market" (for what, you don't say) was created by government policy hundreds of years ago (but not thousands of yeas ago?)
2) The market needs constant interference in order to not destroy itself (and again you seem to be referring to a great range of economic activity, perhaps all of it, but not all of it because you're also saying it would destroy "much else")
Do you have evidence to support either of these claims, other than begging the question? Would you like to modify them so that they are more specific?
By market, I'm referring to what we refer to as the market today, which is a relatively modern invention. Sure, for thousands of years there have been things called "markets," but they were far more limited in scope and their role in society was not nearly the same.
> 2) The market needs constant interference in order to not destroy itself (and again you seem to be referring to a great range of economic activity, perhaps all of it, but not all of it because you're also saying it would destroy "much else")
I mean, isn't this obvious? The market itself is not going to enforce contracts, it's not going prevent a wealthy person from paying for a private army and making his own rules, it's not going to do anything about monopolies and cartels (at least not on a reasonable timescale), it's not going to manage negative externalities, it's not going to address or mitigate socially destabilizing economic forces, etc.
The market is like a car: it some ways it may be a modern marvel, effortlessly regulating the timing of its complicated internal workings in a way no person could, but without a driver it will run out of gas and as happily drive into a wall than not.
Contrast and compare 'Legal Systems Very Different from Ours' at eg http://www.daviddfriedman.com/Legal%20Systems/LegalSystemsCo...
Maybe this is true with respect to global financial markets, etc. But it can't possibly be true in general. People have stably traded physical goods in literal markets (i.e. stalls where you buy spices and tomatoes and such) for thousands of years with no government intervention.
Small amounts of people do not need a government because they can just represent themselves. Any city needs a government, tasting at any sensible scale needs a the government. 3000BC Egyptians had taxes, laws and a government.
Can you provide some historical example of thousands of citizens trading without a government? That would be an incredible experiment on anarchism.
I think most financial constructs were created by traders, not governments. Financial constructs are basically standard contracts.