Michael Shedlock (Mish) is posting an article on his blog this morning that includes an excerpt from one of his posts from April of 2008. In the earlier post, he creates an interesting question, can the usefullness of the Fed be determined using objective means? I know this is more of his campaign to end the Fed, at least as we know it today, if not completely. Some of his contentions revolve around the notion of free markets and that the Fed is the big disruptor of free markets. So what exactly is a free market? I found an answer that I think Mish will agree with, in an essay on the topic by Murray Rothbard, noted author, economist and proponent of Austrian economic theory.
The Free market is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services. Thus, when I buy a newspaper from a news dealer for fifty cents, the news dealer and I exchange two commodities: I give up fifty cents, and the news dealer gives up the newspaper. Or if I work for a corporation, I exchange my labor services, in a mutually agreed way, for a monetary salary; here the corporation is represented by a manager (an agent) with the authority to hire.
Both parties undertake the exchange because each expects to gain from it. Also, each will repeat the exchange next time (or refuse to) because his expectation has proved correct (or incorrect) in the recent past. Trade, or exchange, is engaged in precisely because both parties benefit; if they did not expect to gain, they would not agree to the exchange.
This definition creates a very friendly concept. Here every participant is thoughtful, honest and a responsible participant in the free market society. Where is this place? As I continue to research the information I need for this article, it is becoming more political. I apologize. That is not what I want out this blog. However, I am the primary beneficiary of the writing here and so please consider this article as a message to myself and you are free to read.
Rothbard continues in his essay to describe in more depth how he envisions a free market society.