Session 5

Free Market

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Session 5

Murray Rothbard, “Free Market”

Murray Rothbard (1926-1995)

Executive Summary

Rothbard (1926-1995) was a professor of economics and intellectual historian whose views drew upon varied sources, most notably the economics of Ludwig von Mises and others in the Austrian School. In this essay, selected for The Concise Encyclopedia of Economics, Rothbard outlines the key moral and economic features of free markets.

  1. A free market is an array of voluntary exchanges. The expectation of each party involved in the individual exchanges is self-benefit.
  2. Many critics believe that markets are zero-sum, i.e., that one party always benefits at the expense of another. But, Rothbard argues, “the willingness and even eagerness to trade means that both parties' benefit.”
  3. The mutual benefit is due to the differing valuations individuals place on the commodities being traded. An employer, for example, values the product of an employee’s labor more than the wage he or she has agreed to pay, while the employee values more the agreed-upon wage. Or “when I buy a newspaper from a news dealer for fifty cents,” it means that I value the newspaper more than the fifty cents while the news dealer values the fifty cents more than the newspaper.
  4. A market aggregates the commodities available for trade and information about individuals’ evaluations of them -- “in shorthand, by the interaction of their supply with the demand for them.”
  5. In barter economies, individuals exchange commodities directly, but “The modern, almost infinite latticework of exchanges, the market, is made possible by the use of money.” Money facilitates trade: for example, “It is much easier to pay steelworkers not in steel bars but in money, with which the workers can then buy whatever they desire.”
  6. A free market enables the open-ended development of the division of labor into specialties, and it “gives the largest possible scope to entrepreneurs.” Markets can increasingly become national and international, enabling more individuals to produce and trade for more items and with a wider variety of people.
  7. By contrast, coercive exchanges do not respect the valuations of all individuals involved. Price controls by governments, for example, prevent individuals from trading on terms they would be willing to. Coercive forms of taxation force individuals to pay for government services they don’t necessarily value.
  8. The complete opposite of free markets is socialism, “the ultimate in government coercion.” Socialism cannot be economically efficient, as the failure of the Soviet Union demonstrated and which even leading “socialists like Robert Heilbroner now admit.”

 

Read Murray Rothbard’s “Free Market”  Summary by Stephen Hicks, 2021.

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