Talk:Free market/Archive 3

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Intro rewritten

The rewrite corrects several ommissions. First the distinction between free market (abstract model) and free market economy (descriptive term).

Second, that both the description as 'free', and the value of a free market economy, are disputed. Third that the usual contrast is with Soviet command economies, but early economists and Marx contrasted it with feudal elements (guilds) and mercantilism.

Fourth that the market is an allocation system in the terms of social philosophy, this can be covered in more detail in a section on ethics.

I also mentionned that many non-definitional features are now associated with a free market. This is relevant for the economic freedom indices covered later, since they use indicators which are not strictly speaking necessary for a free market.

I left out the coercive monopoly distinction, the point was simply that competition need not be perfect, in order to define an economy as free. I added a new section on origins, it can be expanded.

Ruzmanci 12:43, 2 October 2005 (UTC)

Looks pretty good, but I disagree with the sentences about pursuit of profit. For example, the CEO of Whole Foods (a self-described "free market libertarian")recently wrote an essay in Reason magazine saying that he's not pursuing profit, but is serving society out of "love" --profit for him is just a side-effect. Also, profit need not even be existent. For example, there is an economic system called "mutualism" where goods are traded without profit --everything is bought and sold at cost. That's a free-market as well. All that's necessary for a free market is trade and a lack of coercion. RJII 19:07, 2 October 2005 (UTC)

free market vs. perfect competition

Someone is confusing free market with perfect competition. We've gone through this before. A free market may or may not have perfect competition. It's not a necessary condition for a free market. To have a free market, all you have to have is a lack of coercion. The lack of perfect information is one reason people oppose free markets --they think government should intervene on this account. So I deleted the line: "The idealized free market also assumes that agents' decisions are rational, globally informed and most importantly, independent." RJII 15:48, 17 October 2005 (UTC)

the move to "free market (economics)" from "free market"

What's the point of this move? When does a free market refer to anything else but an economic market? Isn't this ambiguation (yes I said ambiguation rather than disambiguation) superfluous and complicating for no reason? Shouldn't have their been a vote on it or something? Besides, isn't the idea of a free market just as much an ethical concept as an economic one? RJII 17:58, 18 October 2005 (UTC)

I moved it back to free market. The reason is there was no consensus or vote. The title is unnecessarily complicated. A free market is not merely an economic concept but an ethical one as well. RJII 22:33, 19 October 2005 (UTC)

Well in that case I will add information about free markets outside the abstract model -max rspct 22:38, 19 October 2005 (UTC)

I look forward to it. RJII 22:40, 19 October 2005 (UTC)

"Initiatory coercion"

1. Does this expression have any currency outside of U.S. libertarian circles? I've never heard it used by anyone else.
2. Unless it has wider currency we should (1) indicate the political connotation of the term and (2) define it, because a lot of people, even with an economics background, won't know it.
3. Am I correct in understanding the term to mean that party A is coercing party B for a reason other than that party B has already committed coercion? -- Jmabel | Talk 05:40, 24 October 2005 (UTC)

Well, a free market is a libertarian concept. And, yes your interpretation is correct. If a government is involved in trying to maintain a free market then it coerces but it only uses coercion defensively. If someone pulls a gun on someone, the government steps in and and uses coercion to stop the guy who initiated the coercion. I've also seen the terminology "proactive coercion" and "reactive coercion," rather than "initiatory" and "defensive." Whatever terminology you want to use, somehow you have to differentiate between a first use of coercion and a defensive use of coercion. RJII 02:46, 12 November 2005 (UTC)

Largely agreed (although the concept of a free market certainly predates libertarianism, probably by about 2 centuries), but in an article on economics, jargon which is that of a political ideology, rather than that of economists, deserves labeling as such. -- Jmabel | Talk 21:06, 12 November 2005 (UTC)

It's not "jargon." It's just the english language. Coercion is the use of physical force or the threat of it. There has to be a way of distinguishing whether you're talking about coercion used offensively or defensively. By the way, the concept of a free market can't predate libertarianism ..it's a libertarian concept. Libertarianism has been around for centuries at least -regardless of what it was called. It's just opposition to physical force unless used in defense. RJII 21:25, 12 November 2005 (UTC)

So you are of the belief that libertarianism was discovered rather than invented? -- Jmabel | Talk 02:26, 13 November 2005 (UTC)

I'm just saying that the idea that people shouldn't use force unless in self-defense existed long before someone decided to call it libertarianism. RJII 15:29, 16 November 2005 (UTC)

"Libertarianism has been around for centuries at least -regardless of what it was called" I think these last few lines by you RJII show just how ideologically driven your edits are. You are plugging YOUR interpretation of 'libertarianism' and 'free market' while making up words (neologisms etc) and passing politically-laden concepts off as fact. -max rspct 15:45, 16 November 2005 (UTC)

Libertarian is the belief that a peaceful person shouldn't coerced --that you shouldn't attack anyone unless they've attacked you first. It's as simple as that. That's why anarchists are referred to as libertarians (does the term libertarian socialism ring a bell?). Any statement of that tenet before it was called "libertarian," we can still call libertarian. There is nothing "ideologically driven" in stating that. A "free market" is one where there is no coercion --it's a libertarian state of affairs. (Note: I'm not using the term to mean the Libertarian Party) RJII 16:05, 16 November 2005 (UTC)

RUBBISH! Libertarianism is a modern ideology - it's not anything or anybody u label it as. -max rspct 16:14, 16 November 2005 (UTC)

It's not any more modern than the idea of a free market. The same goes for the term "free market." We can look back on an example of an ancient society that was engaging in voluntary trade and say they had a free market, even though they didn't call it a free market. The ideas and scenarios existed regardless of what we later name them. RJII 16:17, 16 November 2005 (UTC)

Article needs to be moved

The whole article is bias and is written from a pro-free market perspective. Too many assumptions. It needs to be moved to Free market (the ideal) or something similar. -max rspct 12:01, 21 November 2005 (UTC)

I don't see why you would say that. It talks about problems with having a free market. But, if you like, put in a section dedicated to discussing about what's bad about a free market --why it's good for government to intervene. RJII 14:38, 21 November 2005 (UTC)

I see you deleted some information. But you deleted anti-free market things. Like "externalities (like pollution), and asymmetrically distributed information are often cited as potential problems that may exist in a free-market economy. Knowledge bias can lead to what many may see as evils of such an economy, like insider trading, price fixing, price gouging, adverse selection, moral hazard, and the principal-agent problem." I don't get it. Now the article is even more pro-free market. RJII 14:51, 21 November 2005 (UTC)

Well .. for now I will take out POV and assumptions. I credit you with knowing various things about the free market RJ, but I think that the serious knowledge gaps you have (indicated by u being completely unaware of Irish Potato Famine) are negatively affecting the article. I seems to be turning into a vehicle for the american recieved wisdom regarding the free market. User Kimchi has perhaps recognised this by removing the liberalism box. -max rspct 14:58, 21 November 2005 (UTC)

I was not "completely unaware" of the Irish Potato Famine. I was aware of it, but I wasn't knowledgeable enough on it to discuss it. That is, I hadn't studied the underlying causes so wasn't in a position to talk about something I knew little about. I've since read more about it, and doesn't appear to have been caused by a free market --there was no free market, government intervention in the Irish economy was very significant. Anyway, you don't appear to have much of an idea of what you're doing if you claim the article is pro-free market then delete anti-free market points. And this talk of American bias in the article is absurd. Free market philosophy and liberalism did not originate in America. RJII 15:21, 21 November 2005 (UTC)

Tell you what - you write those things back in somewhere.. it doesn't have to be in criticisms section (but perhaps price gouging insider trading etc should be kept together) and I will put in/expand the sociological views and/or Marxian explanation of free markets. -max rspct 15:11, 21 November 2005 (UTC)

Sounds good. I look forward to it. RJII 19:32, 21 November 2005 (UTC)

Libertarian

What's up with this emphasis on Libertarianism; it is mentioned in almost every paragraph, and Libertarianism is hardly a powerful movement. --TheRedAnthem 18:51, 1 December 2005 (UTC)

"Libertarianism" is not mentioned (a political party), "libertarianism" is mentioned (small l). It's kind of hard not to mention libertarian when a free market is a libertarian concept. Merrian-Webster Unabriged defines a libertarian as "one who upholds the principles of liberty ; specifically : one who upholds the principles of individual liberty of thought and action." Libertarianism is the opposition to coercion. A free market is one without coercion. It's a libertarian economy. Libertarians are the ones who push for free markets. Everyone else pushes for interventionism or no markets. Maybe we could say "economic libertarians" to be a little more precise. RJII 18:57, 1 December 2005 (UTC)

As an american, my best take on liberalism vs. libertarianism is that around the turn of the 20th century, the liberals became progressives (e.g. Presidents Wilson, Roosevelt), arguing liberalism was really defined by it being progressive and that further progress to statism (welfare state or socialism) is also liberal. From then on, the people you all in europe would call liberals became libertarians. I think in part because it is an antonym to authoritarian, which was deemed to be the essence of the US 'liberal' or progressive welfares state.Mrdthree 03:16, 25 March 2006 (UTC)

Definitions

I actually think there should be a separate series for Captalism vs. Socialism vs. Free Market vs. Command Economy vs. Planned Economy vs. Decentralized Economies vs. Mixed Economies, as their definitions are somewhat intertwined.

I got out my econ notes from a while back, I'm basically checking my definitions first:

There are two different ways to catergorize an economy into two.

Little Regulation Heavy Regulation

and

Low Government Expenditure High Government Expenditure

Heavy regulation AND high government expenditure are command economies, heavily regulated economies are planned (price wages enforced by the Nazis for example (although I didn't mean the example to be so extreme)), little regulation is decentralized, low government expenditure is capitalist, high government expenditure is socialist, and free market is both low government expenditure and little regulation.

Note that these are very subjective, and are not as simple as saying "Above 50% government expenditure as a portion of the GDP is socialist," because France has above 50% government expenditure as a portion of GDP and some people refer to it as Capitalist and some as Socialist. Similarly the argument goes for little and heavy regulation, some may say that the U.S. is decentralized while others are extreme enough to say it's a planned economy, the difference in opinion comes from the subjectivity of the two terms (I, for example, say that the U.S. is a planned economy because I'm pissed off and opposed to the regulations on power companies; but that's my opinion). China considers itself Socialist, while many other consider it Capitalist. Some consider the Soviet Union Capitalist because of it's Black Market activities. And so on.

In other words:

Little Regulation AND low government expenditure=Free Market Economy

Little Regulation=Decentralized Heavy Regulation=Planned

and

Low Government Expenditure=Capitalist High Government Expenditure=Socialist

High government Expenditure AND heavy Regulation=Command Economy

Oh! And a mixed economy is any economy that is thought of as a mix between socialist and Capitalist, technically this is all countries, but it is also a subjective factor (Subjective in that the percentiles aren't really placed, it's not like below 10% government expenditure is Capitlist, from 10-90 is mixed, and Socialist is >90). Fephisto 16:15, 6 December 2005 (UTC)

I agree with some of that, but, again, socialism is not just a matter of a particular economic role for government. For example, council communism is almost certainly socialist, but does not involve a strong central government. -- Jmabel | Talk 07:25, 7 December 2005 (UTC)

I've almost considered council communism a form of local socialist government (the actual picture in my head is reminiscent with Walden 2). Other than this, you say 'some of that,' what other problems do these definitions run into? I'm basically trying to help out the command and planned economy articles, so redefinitions would be helpful.Fephisto 17:27, 7 December 2005 (UTC)

Level of regulation and level of expenditure are certainly not the only variables. Other variables include the difference in the degree to which private property is recognized (for example, whether it is possible for individuals to own land: in many societies historically it was not) and, closely associated, whether title is based in a tradition, law, or brute force; whether lending at interest is allowed; the degree of freedom of association the degree to which voluntary associations are recognized (that may not immediately sound economic, but consider corporations and unions). There is a tendency at times for us to be a bit myopic and consider only contemporary, industrial societies.

This is all, of course, very "meta". None of this should make its way into articles without cited references. -- Jmabel | Talk 01:43, 9 December 2005 (UTC)

Fiat money

Recently added, I'm removing:

Trades in a free market should be made without using Fiat money, as long as the widespread acceptance of fiat money is enhanced by a central authority which mandates the money's acceptance under penalty of law or the fear or war (in case of international relationships) and demands this money in payment of taxes or tribute.

For starters, uncited: "should" according to whom? But beyond that, this is just confusing two issues. Exchanging an ounce of gold for a bag of cocaine and exchanging three Federal Reserve Notes for the latest Rolling Stones album may both be free-market transactions, even though the latter involves fiat money. And taxation is not a free-market transaction, whether the tax is paid in platinum or Romanian lei. -- Jmabel | Talk 19:46, 25 December 2005 (UTC)

Agree. Makes it unnecessarily confusing and adds nothing--Looper5920 19:57, 25 December 2005 (UTC)

As a participant in a free market I might choose to accept fiat money. There wouldn't be a rule against it. It seems a political activist POV is being pushed. Paul Beardsell 21:57, 25 December 2005 (UTC)

If you accept fiat money produced by a money maker authority, then you accept authority's taxes (as long as there is no fiat money without taxes). If you accept taxes, then the market is not free market anymore, there is always tax-deductibility in some kind of exchanges or trades. Do you think that a market having taxes imposed by a central authority can be named a free market? Even in the fictional case where there is no tax-deductibility and where all kind of exchanges or trades have an identical tax, the fact that there is a tax causes some exchanges or trades to stop, and this is against the free market concept. Onassi 23:20, 25 December 2005 (UTC)

I don't agree that accepting fiat money as payment in a transaction means that one will pay one's taxes, necessarily. Further I don't accept that Free is a black/white issue: There are degrees of freedom. Paul Beardsell 23:46, 25 December 2005 (UTC)

If you're free, you can use any kind of money you want to use for anything you want to use it for. There isn't a free market in money in the U.S., for example, though. That's because of the legal tender laws --makes it very difficult for private money to compete (impossible in the loan business). But, anything about this certainly shouldn't be up there in the definition. RJII 06:06, 27 December 2005 (UTC)

Hmm. Can you expand upon that? As far as I can tell, "legal tender" simply means that the fiat currency is a valid offer (tender) to pay a debt denominated in dollars. It does not require that people accept payment in the currency: I can legally set up a Web store that accepts only e-gold, for instance. I can also make loans that aren't denominated in dollars -- for instance, I can borrow or lend stocks as part of a short sale.

Also, there are a number of other currencies in use in the U.S., most of them in specific cities. See local currency. --FOo 06:16, 27 December 2005 (UTC)

If you make a loan to someone, in a private currency like e-gold, then you're required by law to accept U.S. dollars in repayment of that loan. That means if the U.S. dollar is devalued in the meantime, the debtor could settle the debt for pennies on the dollar. That's a huge risk for you as a lender to take. That's why you won't find banks lending e-gold. Legal tender laws create a coercive monopoly on what currency is used for lending. So, a private currency can only compete in immediate payments. RJII 06:30, 27 December 2005 (UTC)

What law says that, exactly? I can contract with someone to deliver me a sack of onions on Monday. Come Monday they cannot give me USD instead. But say, for the sake of argument, they could: If on Monday the value of the USD has collapsed relative to the price of onions, then on Monday they would have to give me the Monday value in USD of the onions. So, the risk is not as you describe. Paul Beardsell 20:58, 27 December 2005 (UTC)

Onions wouldn't be a monetary debt. Legal tender applies to money. E-gold would be money, but onions in your example would not. If I lend you 10 e-gold dollars, and the US dollar subsequently devalued against gold you could pay me back with the amount of dollars required to purchase 10 e-gold at the time of the loan and I'd have to accept it. RJII 04:00, 28 December 2005 (UTC)

Circular argument: You say it's not a debt unless denominated in dollars. From this you conclude that all debts (onions, e-gold) are repayable in dollars. Both are equivalent and incorrect statements. There is no such thing as "10 e-gold dollars". E-gold debts (and gold loans in the REAL WORLD) are denominated in units of mass (or weight) of gold. They are real debts. A gold loan from (or to) Goldman Sachs (or whoever) is only repayable in gold, dollars are not acceptable without the agreement of both parties. Paul Beardsell 08:22, 28 December 2005 (UTC)

No. You are not allowed to do exchanges and trades without using money coined by the central money maker authority. If a person or a community decide to do their exchanges and trades without using money produced by the central money maker authority, and they finnaly succeed to possess real value goods (like energy, food, transport, land, accomodation e.t.c) then the community or the person are accused for tax evasion and they are forced to pay taxes using money. Of course the community or the person have no money to pay (as long as they dont use it) so the authority simply confiscates the real value goods. Thats how everybody is finnaly coerced to use the money of the central money maker authority. Onassi 09:29, 28 December 2005 (UTC)

The first part of that is absolutely false. I personally and legally enter into contracts with no fiat money component from time to time. And businesses I have worked for and of which I am a customer do this all the time too. The second part, that there may (or may not) be taxes due on the profit which might accrue or, in certain jurisdictions, on the transaction itself (stamp duty e.g.) is besides the point. You have stated here more than once that what happens every day is illegal. Not true. Paul Beardsell 21:45, 28 December 2005 (UTC)

Maybe the phrase "you are not allowed" is not the correct one to use. I didnt meant that everywhere and in all countries is illegal to do trades and exchanges without using money coined by a central money maker authority (although it is illegal in some countries). I said that IF you manage to do your trades without using authority's money, then the authority will catch you finnaly and you have no chance to escape from it. Whatever real value goods you manage to gain, the money maker authority will ask you to give taxes for the possession of those goods. That way you are indirectly forced to use authority's money in order to pay the taxes, otherwise your goods are confiscated by the authority.

KymeSnake said below: After the state's collapse private properties like money or real estate vanishes and only movable real value goods like energy sources or information can still remain privately owned (if stored carefully) and become the subject of a new state-less and money-less market.

I think that a free market is not a market that uses as medium of exchange money coined by a central money maker authority which holds the loan monopoly and the right to impose taxes. A free market could be defined as a tax-free and independant by a central authority market which uses as medium of exchange a movable real value good that holds the money properties (store value, medium of exchange and unit of account) along with the property to remain usefull after a possible collapse of the state .Onassi 22:20, 28 December 2005 (UTC)

The so called "coercion" of taxes is neccessary for a market to exist. It is obvious that there is no market whithout private property and it is also obvious that private property itself can only exist while there is someone to defend it. Traditionally the one who defends private propery (and defines it also by issuing the ownership titles) is the state (which also nominates the central money maker authority). It is reasonable to ask (or coerce if you like that term) the people who are doing their exchanges and their trades to give something back in return for the state defense (and definition) of the money or the real estate property they gained during those trades. This comes in the form of taxation. A market without taxes is like water (H20) without oxygen (O). A "free" water is not a water without oxygen. It is a matter of definition of free after all. After the state's collapse private properties like money or real estate vanishes and only movable real value goods like energy sources or information can still remain privately owned (if stored carefully) and become the subject of a new state-less and money-less market. KymeSnake 20:02, 28 December 2005 (UTC)

I don't believe you. No, really, I agree with you that fiat money is bad, but I think you've got a bad misconception of legal tender. People do, today, in a fiat-money economy, make loans of all sorts of reasonably fungible commodities ... yes, including gold. Neither onions nor gold are denominated in dollars. If I make a loan of dollars, then currency is of course a valid offer to pay it. If I make a loan of onions or gold, it is not.

I think that what has you confused is that "dollar" was not always a fiat currency. It was once a silver certificate, or a silver coin. It was debased. Legal-tender laws meant that people couldn't legally demand the old silver dollars instead of the new fiat dollars. If you had a dollar-denominated debt that you expected to be redeemed in silver dollars, the debtor could pay you back in fiat dollars instead. As a result, Gresham's law went into action and the silver currency disappeared from circulation: nobody would spend it if they could spend fiat instead.

In short, legal-tender laws do not screw over the person who makes a loan denominated in onions or grams of gold. They screw over the person who expected silver dollars and got paper dollars. They are simply an accessory to the standard statist crime of counterfeiting the currency by debasing it -- a statist crime that goes back to antiquity. --FOo 04:47, 28 December 2005 (UTC)

Legal tender laws may go back to antiquity. But taxes dont go back to antiquity, they are still valid and they are still imposed by the central money maker authority. The central money maker authority coerces everyone who possesses real value goods to pay taxes using money, otherwise confiscates the real value goods. This is how everyboby is finnaly coerced to use the money of the central money maker authority, and as long as there is coercion, the market controlled by the central money maker authority cannot be named a free market. Onassi 14:00, 28 December 2005 (UTC)

Correct. A free market can not be a market controled by a central money maker authority which mandates the money's acceptance under penalty of the legal tender laws and in that way creates a coercive monopoly on its currency which is used for lending. Onassi 11:00, 27 December 2005 (UTC)

I am not taking any position in favor or against a free market. I am not saying that a free market is a good or a bad thing. But a free market is by definition a market without coercion, so it is the accurate definition which I am defending. I disagree that there are degrees of freedom. Something is either free or it is not. But there are different definitions of free, and something can be declared free along with some exceptions on its freedom. So its ok with me if you want to define as free market a market without coercion with the exception of the coercion of the central money maker authority which, under the penalty of a legal tender law, creates a coercive monopoly in order for its currency to be used for lending. Otherwise if you dont want to define a free market that above way, you have to make clear to the reader that a market with legal tender laws, taxations, tributes and a central money maker authority cannot be a free one. I think there is a lot of misunderstanding in the free market concept, and many people are calling their unfree markets as free ones. Onassi 11:14, 27 December 2005 (UTC)

"I disagree that there are degrees of freedom." Wow! So, for example, it is not meaningful to say, "In 1950 there was more economic freedom in Paris than in Warsaw" or "the press today is considerably more free in the European Union than in Myanmar"? If that is what you mean, then I have to say that you just have an idiosyncratic use of the term. -- Jmabel | Talk 19:05, 27 December 2005 (UTC)

I disagree that there are degrees of free. Something is either free or it is not. There can only be degrees of unfree. Is it clear now? Onassi 09:04, 28 December 2005 (UTC)

What you say is, I think, clear to me but that doesn't mean I agree! The "free" you describe doesn't exist. You are not free from the encroachment of Winter, you are a slave to water. I cannot see the difference between "degrees of unfree" and "degrees of free". Of course some markets are more free than others. Be sensible. Paul Beardsell 21:50, 28 December 2005 (UTC)

Alan Greenpan on fiat currency / free market

http://www.usagold.com/gildedopinion/greenspan-gold.html:

Mr. GREENSPAN. I think you have to define what you mean by a free market. If you have a fiat currency, which is what everyone has in the world——

Dr. PAUL. That is not free market.

Mr. GREENSPAN. That is not free market. Central banks, of necessity, determine what the money supply is. If you are on a gold standard or other mechanism in which the central banks do not have discretion, then the system works automatically. The reason there is very little support for the gold standard is the consequences of those types of market adjustments are not considered to be appropriate in the 20th and 21st century. I am one of the rare people who have still some nostalgic view about the old gold standard, as you know, but I must tell you, I am in a very small minority among my colleagues on that issue.

RJII 01:17, 6 January 2006 (UTC)

But a free market in what? Just because there is not a free market in exchange rate movements between currencies, or in the prevailing interest rate in a currency, this does not mean there is not a free market in onions. I am sure if Mr GREENSPAN had made that point that Dr PAUL would have agreed with him. Or vice versa. They are talking about currency management, money supply issues: Particular markets, not all markets. Paul Beardsell 01:41, 6 January 2006 (UTC)

I agree with you. But, if not all markets within an economy are free markets, then the economy as a whole is not a free market. And, money is a pretty significant commodity in an economy. RJII 04:14, 6 January 2006 (UTC)

Yup. But then it becomes a matter of what words we use. Say we use the term non-coerced markets for free markets, and coerced markets instead of non-free markets. Then it becomes a case of not how much grit is in the flour but how much flour is in the grit. I contend that when we characterise any sizeable economy as a "coerced market economy" that we acknowlegde implicitly that there will doubtless be some markets in that economy which are not coerced. We know, when we say "coerced market" that we mean predominently coerced. We know there are degrees of coercion, "they" cannot control everything. And the same is true for a "non-coerced market economy": Some control, policing, infrastructure is required. We might even voluntarily agree thay some central body assay our bars of gold and atest to their purity so that we don't have to worry about it on every transaction. The least "coerced market economy", the most "free market economy", might therefore have a central "bank", and a levy for the cleaners to sweep away the rotten tomatoes. The free-est markets might necessarily have elements of compulsion. Paul Beardsell 07:31, 6 January 2006 (UTC)

Also, were a return to the gold standard accomplished by Greenspun in the time remaining to him, there would be some here who would argue that a free market still does not exist because of compulsory taxes. So let's not conflate these issues - fiat currency and free markets are two issues which are not particularly entwined. Paul Beardsell 01:41, 6 January 2006 (UTC)

POV pushing

Parts of this article and some recent contributions read just like a political pamphlet. Too much, already. Stop the propaganda! Paul Beardsell 22:37, 28 December 2005 (UTC)

I added a POV tag because the article supposes that the introductory paragraph discuss thee 'free market' primarily as a politcal rhetorical construct rather than an economic construct. Mrdthree 02:52, 25 March 2006 (UTC)

NOR; topic of article

I basically agree with the content of the recently added paragraph that begins "On the other hand, the so called "coercion" of taxes…" However, it is uncited, and its inclusion here without citation smacks of original research. Also, we really need to decide just what is the topic of this article: is it (as RJII has repeatedly argued) about a pure, abstract economists' model, or is it also about the circumstances in the world in which such a thing may be approximated? If the former, this does not belong; if the latter, we should find someone citable who makes essentially this case. -- Jmabel | Talk 06:18, 29 December 2005 (UTC)

It's a common rationale for the sacrifice of ideal free market principles to maximize economic freedom in practice. It's why an anarchist in theory would advocate the existence of government to get as close to economic anarchy as was practically possible. The whole "government is a necessary evil" thing. I agree it would help if it was sourced though. RJII 06:28, 29 December 2005 (UTC)

legal tender misunderstanding

I have removed the following recently added material from the article and I say why below.

[Money]], in a truly free market economy, is not monopolized by legal tender laws or by a central money maker authority which coerces society to use its own money as the unique medium of exchange in trades, in order to receive taxes from the transactions or to be able to issue loans.

On the other hand, the so called "coercion" of taxes is arguably essential for the market's survival, and a market free from taxes may lead to no market at all. It is obvious that there is no market without private property and it is also obvious that private property itself can only exist while there is someone to defend it and define it. Traditionally, the State defends private property and defines it by issuing ownership titles, and also nominates the central authority to print or mint currency. It is reasonable to coerce people who are doing their exchanges and their trades to give something back in return for the state defense and definition of the money or of the real estate property they gained during those trades. If no taxes are given back to the state then the state collapses. The state's collapse causes private property such as money or real estate to be undefined, and without money or real property, the market, too, may collapse. After the state's collapse only movable goods such as energy sources or information or weapons can (if stored carefully) still remain privately owned and become the subject of a new stateless market.

"Free market anarchists" disagree with the above assessment, as they maintain that private property and free markets can be protected by voluntarily-funded services (see individualist anarchism and anarcho-capitalism). A free market could be defined alternatively as a tax-free market, independent of any central authority, which uses as medium of exchange one or several objects (real or virtual ones) that hold the three properties of money (store value, medium of exchange, and unit of account) along with a fourth property of use value (such as energy) or being trusted (as gold was in antiquity) even in the absence of the State. It is disputed, however, whether this hypothetical stateless market could function freely, without coercion and violence.

Onassi has in several WP articles inserted the assertions in the 1st quoted para, above. They are either false or, if you like gross overstatement. Legal tender laws do NOT mandate the use of a particular currency for the issuing or repayment of loans. Payment in legal tender can be insisted upon by the payee ONLY where the debt is denominated in units of the currency of the legal tender. Legal tender refers to the legal form of payment in a particular currency. If it is US$2.00 for a hamburger then payment cannot be in raw onions - it must be in US$ and legal tender law says what the form of that payment is. What is written in the 1st para is a fundamental misunderstanding of the concept of legal tender. Legal tender is a currency-specific concept. Onassi is correct to say taxes must be paid in the government's choice of legal tender (just as MacDonalds chooses the currency to be used for the purchase of hamburgers). But that is at far as it goes. There is no uniqueness of medium of exchange or loan repayment currency. (If I borrow onions typically the contract says I must repay onions - that is the default in law also.) Paul Beardsell 20:58, 30 December 2005 (UTC)

The 2nd and third paras are simply reaction and re-reaction to the first. All culled, therefore. Paul Beardsell 20:58, 30 December 2005 (UTC)

Onions or hamburgers cannot be used as money. Money is a marketable good or token used by a society as a store of value AND a medium of exchange AND a unit of account. Onions and hamburgers do not have store value, they expire. So you cannot loan or borrow onions. KymeSnake 14:36, 31 December 2005 (UTC)

Of course you can. And it happens all the time. Unless you are using a meaning of the word "cannot" with which I am unfamiliar. Paul Beardsell 19:44, 31 December 2005 (UTC)

Onions can be bartered but because they expire no one will use them as money. After WWII the Germany money was so over inflated (thanks to poor government planning, over-regulation, and of course printing to much money) the Germans used cigarettes, and congnac as the medium for transaction. Cigarettes for small transactions and the liquor for larger transactions. Also remember, money has to have a value. If there is too much it won't have much of a value. Governments had a hard time figuring this one out. (Gibby 22:20, 25 February 2006 (UTC))

But, KymeSnake, you address my frivolous example and not the substance of my argument. I say that there is a misunderstanding of "legal tender" exhibited in this article and I cull the offending material and, as per well established WP procedure, I have placed it here for discussion. You have now replaced the material without discussion. Paul Beardsell 19:59, 31 December 2005 (UTC)

The misunderstanding is that "legal tender" confers a much greater monopoly on a particular class of money over other monies than is actually the case. All that ascribing "legal tender" status to certain examples of a money does is make payment of debts denominated in the same currency legally payable using those examples of that money. You (or the article) and Onassi have it the wrong way around. The payment in "legal tender" of a debt denominated in the currency of the "legal tender" cannot be refused! No other privelege is given to legal tender. If I owe you US$2.00 and I offer you a bunch of onions you are allowed to accept the onions, if you like. If you owe me US$2.00 and you offer me a "legal tender" form of US$2.00 then I cannot refuse the payment and insist upon onions. Paul Beardsell 19:59, 31 December 2005 (UTC)

But note the essential feature: A debtor can force the acceptance of "legal tender" to discharge his debt ONLY if the debt is denominated in the SAME currency as the "legal tender" money is! To repeat myself AGAIN: If you owe me onions (and you could owe me onions!) then I can insist on repayment in onions. Paul Beardsell 20:07, 31 December 2005 (UTC)

All that legal tender is, is the ascribing to certain examples (coins, notes) of a particular money a special status. There is nothing to prevent two different monies being in circulation and each of them having coins & notes which are legal tender. That this is not common does not mean the contrary. Paul Beardsell 20:07, 31 December 2005 (UTC)

"Legal tender" is a status conferred on certain examples of a money, not on the money itself. Legal tender says what really is US$, it doesn't say that US$ is a more legal form of debt repayment than onions. But if you owe US$ the lender can (and usually does) insist on repayment in a "legal tender" form of US$. Not all pennies, e.g., as that would not be legal tender for any sizeable debt. Unfortunately, the govt has not "coerciveley" defined or issued the std "legal tender" onion so your repayment to me of onions will require a careful inspection of the onions, and we might disagree. But that is a DIFFERENT issue entirely. Paul Beardsell 20:14, 31 December 2005 (UTC)

Legal tender, debasement, Gresham's law, and inflation

The problem that "legal tender" laws create in a free market is closely related to Gresham's law. The law (paraphrased) holds that if two kinds of "money" are both mandated as legal tender, people will tend to hoard the one with a higher free-market value and spend the one with the lower value. In other words, if I can choose to buy an onion with a silver dollar or a fiat dollar, I will choose to spend the fiat dollar because the silver one has real free-market value while the fiat one is just a piece of paper.

Gresham's law only crops up when people are required to accept two different forms of money (or any other commodity) as equal, despite the fact that the two are not equal in market value. It isn't specific to money. If I'm required by law to buy any onion for one dollar -- regardless of the onion's quality -- then onion sellers will naturally wish to fob off their poorer-quality onions on me, while hoarding their higher-quality ones for their own use, for another buyer, or even to sell on the black market.

Consider U.S. currency. In 1965, President Johnson debased the coinage, replacing 90% silver coins with base-metal ones. There is a reason you will not find pre-1965 quarters in circulation: today, the bullion value of a silver quarter is more than a dollar, while a fiat post-1965 slug is just worth 25 cents. However, a cashier or vending machine will only give you 25 cents worth of goods for a silver quarter. So anyone who owns silver quarters will hoard them, or sell them as scrap silver at >$1 each, rather than foolishly spend them as currency!

That's Gresham's law in action: under legal-tender laws, the currency of higher free-market value is driven out of circulation by the fiat-currency slugs. This allows the government -- since it controls what is legal tender -- to create inflation (and finance itself) by debasing the currency. Debasement is nothing new: governments debasing the currency goes back at least to ancient Greece.

In contrast, in the absence of legal-tender laws, Gresham's law can operate in reverse: good, reliable money can drive bad money out of circulation. (The meanings of "good" and "bad" are a little bit changed here -- in the previous example, "good" meant higher-value; here it means less inflationary.) See, e.g., dollarization, where a less-inflationary fiat currency replaces a more-inflationary one in a relatively free market (or even a black market).

Inflation is generally bad for individuals who hold and use money, since it means that their savings degrade in value ... although it is very good for debtors, particularly debtor governments, since their (currency-denominated) debt decreases in real value. That's why inflation is sometimes referred to as a form of theft or "hidden tax": it steals from those who earn and save, to benefit a debtor government. Likewise, the inability to realize a preference for a better (higher-valued or less-inflationary) currency creates an obvious economic inefficiency. These are why legal-tender laws are bad for a free market. --FOo 22:55, 31 December 2005 (UTC)

This has gotten larger, but has it gotten better?

1. Is this an article about an ideal model, about a real-world phenomenon, or both? Right now it seems to me to be a somewhat murky mix.

2. Insofar as this is an article about an ideal model, is it about a pure, extreme model used by working economists, more a mathematical simplification than necessarily something to be striven for; or is it about a goal pursued by those subscribing to libertarian ideology?

3. What here has a deeper basis than the opinions of its authors? I ask because little in the article has more than vague citation, and most of it lacks even that: "as theorized by economists and ethicists", "many assert", "are advocated by proponents", "For social philosophy", "Some people believe", "It is obvious", "It is disputed"; these are not citations. "Kenneth Arrow and Gerard Debreu have shown", "Many advocates of free makets, most notably Milton Friedman, have also argued", etc., are only marginally better: how can anyone check such a vague citation?

4. I could go on at length, but let me just pick out one statement that seems to me to be downright cranky: "Some people believe that Money, in a truly free market economy, is not monopolized by legal tender laws or by a central money maker". No doubt that some people believe this. Some people believe world revolution is just around the corner, but I don't go adding that to Politics of the United States. The question is whether this is an opinion held by a significant number of scholars, by a minor but significant political faction, or by a few politically insignificant individuals.

Jmabel | Talk 08:39, 8 January 2006 (UTC)

I have cut the following sentence: "In a free market, purchaser satisfaction alone determines the success or failure of particular goods and services." This is simply not true, even in a pure model. For example, a poor person may be very unsatisfied with the only food he or she can afford, but still be compelled to buy it in order to survive, leading to success; similarly, at the other end of the market, a truly wonderful good or service may require using a scarce resource, and the resource limitation rather than purchaser satisfaction may cause failure. - Jmabel | Talk 04:32, 4 February 2006 (UTC)

I tried taking a shot at a little bit of this, but it's really hard even to tell what is being asserted. For example, is the claim that fiat money is incompatible with a free market supposed to be the view of mainstream economists? If so, a citation would be very much in order. If (as I suspect) it is a view held only by rather radical libertarians -- because I don't remember even Milton Friedman making this case -- that should be explicit. - Jmabel | Talk 23:55, 20 February 2006 (UTC)

Well, Alan Greenspan said fiat money is "not free market." [1] He's mainstream. From what I can tell, it seems like there's this idea going around on Wikipedia that economists that support laissez-faire are not mainstream. Maybe that was the case back in the 70's, but not anymore. What you call "radical libertarianism" is mainstream among economists today. There's not many that buy into interventionism philosophy anymore. RJII 01:45, 26 February 2006 (UTC)

No country in the world today practices laissez-faire economics. No economists in positions of power (e.g. Alan Greenspan) have chosen to use their power to institute a laissez-faire economy. Thus, laissez-faire is not mainstream. Alan Greenspan may have said that fiat money is "not free market", but he obviously supports fiat money - being in charge of the Fed and all... -- Nikodemos 02:22, 26 February 2006 (UTC)

Whether economists are in "positions of power" or not is irrelevant. Laissez-faire is the prevailing economic philosophy of economists today. Statism has been thouroughly debunked. RJII 21:23, 26 February 2006 (UTC)

Geez, if Wittman is the best you all can muster...his reasoning is so horrible. His arguement on what constitutes coersion is not coersion...

And of course no economist in power argues for free markets...free markets will put them out of buisness!!!! (Gibby 10:45, 26 February 2006 (UTC))