Fri, 13 Nov 2009

Free versus Unregulated Markets

You will, from time to time, see people ask for more regulation of markets. I don't really need to cite any examples, do I? They're all over today's newspapers, claiming that unregulated or deregulated or free markets are responsible for the collapse of various businesses.

There is no such thing as an unregulated market, however. The term "free market" is a bit of misnomer. Participants in a free market are not free to do anything they want. If you fail to make a product that people choose to buy, that is a freedom you will find unavailable in a free market.

Let us be clear: there are markets which are regulated by politicians, and there are markets which are regulated by customers. There are no unregulated markets. There are no free markets. There are only markets in which customers are free to reward or punish businesses, and markets in which customers are prevented from rewarding or punishing businesses.

Which kind of that market do you want? One where you are free to buy or not buy? Or one where you are hampered?

John Kay makes a similar point.

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