[ZenoArrow]

> "Regulations are a part of a free market."

Are you sure? I've never heard another free market capitalist argue that government regulations are an important part of how their ideal market works. Can you point out any free market economists that have argued for government regulation?

[tomp]

That's because those free market capitalists are (at best) hypocrites or (at worst) stupid. Obviously capitalism relies on regulation - of property rights, IP rights, contract laws, bans on fraud and insider trading (although opinions are mixed on that last one), ...

[ZenoArrow]

Free market capitalists argue that what we have now is not a free market. IP rights wouldn't exist in a free market system, for example.

It's probably best to find another term to describe the market you see working, as 'free market' is what free market capitalists argue for. I don't know what a better term would be, but I'm sure that economists would've thought of one.

[tomp]

But what would exist in this ideal "free" market? IMO, without contract law and courts that enforce it and persecute fraud, you can't have a functional market (free or unfree). Also, without some laws that monopolize violence, the market would be much more, well, violent (you might think of that as "free", but I don't think that kind of freedom is beneficial to the society) - we can see that in numerous places on Earth right now, where there is no effective "government" and you have multiple factions fighting for power - it rarely encourages trade and entrepreneurship.

[ZenoArrow]

I'm not advocating for free market economics, I'm only passing on information about what it means. The Wikipedia page is a fairly decent introduction:

https://en.m.wikipedia.org/wiki/Free_market

[venomsnake]

Regulations that make possible entrance to a market - standards, forced ineroperability, common carrier, dumb pipes etc - are generally good and provide more efficient market.

Regulations that prevent entrance to a market - by artificially rising the capital requirements to the impossible, are probably not helping the free market.

[tomp]

Exactly - the government should prevent markets from becoming less free - discouraging monopoly, persecuting fraud, encouraging transparency, taxing (appropriately) externalities, and owning natural monopolies (like infrastructure - dumb pipes owned by the government or a very regulated entity, and used by market competitors). I also think there should be less regulation in certain very regulated markets (banking, food) to encourage experimentation, but those should come with restrictions (e.g. no advertising, limited sales volume, etc.) - I think the world of hedge funds is a good example - they have less restricitons and hence can offer lower costs and better (or less correlated) performance, but they are effectively closed off to the general public (only "knowledgeable" investors can invest).

[TeMPOraL]

How do those free market economists solve the problem of externalities?

[asift]

How do monopolistic entities full of self-interested humans solve problems of externalities?

The economics research on public choice has done a great deal for setting aside the common yet inaccurate assumption that government agents pursue the interests of society. It's not appropriate to compare real world markets to utopian governments. Both are imperfect. The real question is which is superior under realistic assumptions.

[TeMPOraL]

> Both are imperfect. The real question is which is superior under realistic assumptions.

And I'd say, why not both? It's obvious that the market is superior in many cases. It's also obvious that the government is superior in others. They both cover for each others' failures.

[asift]

In a very narrow view (i.e., how the world exists at this moment) I agree that both are necessary.

Over a longer time horizon, I'm not certain how "obvious" it is governments are superior. It takes time for alternative institutions to develop, but the institutional problems that are inherent to governments are avoidable through private institutions. The presence of governmental institutions causes a lot of distortion and disincentives to create alternative forms of governance (governance that could surpass governments in terms of quality provided), so I'm not certain we should simply look at the world as it is today and conclude that governments are inherently superior.

[TeMPOraL]

But who says that governments are superior? It makes no sense, it's like saying that a heart is superior to a lung. It's not, you need both!

Governments and markets cover for each others failures. Where a government is inflexible, a market can find an efficient solution. When a market is trapped in a race to the bottom, the government creates coordination. They complement each other.

As for the argument that keeping the current government prevents us from experimenting with alternative forms, you could say the same about free market keeping us from experimenting with different forms of markets...