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By: David Momanyi

B.Sc. (Kenyatta University)

Evaluating Whether the Concept of Free market is a Utopia or an Achievable Goal

The concept of free market has attracted heated debates both in the academic and in the

business world. It refers to an unregulated type of economic system characterized by lack of or

little government interference in various business activities. Such market is largely controlled by

the forces of demand or supply (Ebeling). The concept has been used synonymously with the

term laissez-faire capitalism while referring to unobstructed competition within the economy in

which private transactions occur between sellers and buyers. Overall, a free market encompasses

all the voluntary economic activities occurring without any coercive influence from the central

authorities. Although both voluntary socialism and laissez-faire denote free market, the latter

denotes common ownership of the economy’s production means (Ebeling). In practice, there is

no economic system that is absolutely free of any government control. Instead, the so-called free

market is often characterized by minimal interference from the government or other central

authorizes. In addition, a true free market would be devoid of the various prevailing economic

systems, including taxation and central banking. This research paper advances the argument that

an ideal free market system is not an achievable goal but rather a utopia due to the existence of

some of control from central authorities, including minimal government influence, taxation,

monopoly in terms of currency creation, and central banking.

Before delving into the issue of the attainability of a free market, it is critical to examine

the characteristic of such market. One of the primary characteristics of this market is that an

entirely voluntary exchanges of services and goods among sellers and buyers. Given that a free
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market economy is largely centered on capitalism, there is free exchange of services and foods

within an open market (Ebeling). The value of the market’s outputs, including price, are solely

determined by the interaction buyers and sellers, phenomenon called voluntary exchange. As

both parties (consumers and produces) strive to serve their won self-interests, they end up being

better off after the exchange than they were prior to it. Such argument is largely consistent with

the principle of voluntary exchange, which holds that “two or more parties engaging in

commerce, without coercion, will achieve mutual benefit” (Marshall 122). Obviously, voluntary

exchanges are largely attainable in free markets.

The mutually beneficial exchanges characterizing free markets in turn result in expansion

and freedom of individual choice. A free market is centered in economic freedom, which also

serves as a prerequisite for the existence of freedom of expression vis-à-vis political freedom

(Zupan 171). However, such freedom of expression cannot be attained in markets where the

government controls the means of production. Similarly, the freedom is not attainable in

situations markets where individuals are in capable of sustaining themselves due to lack of the

necessary economic means to do so (Zupan 171). Overall, individuals within a free market have

a freedom of choice of their economic activity. They can freely choose to be entrepreneurs,

investors, gain profits, engage in competition with each other, set their own prices, and sell or

purchase their private property.

One of the arguments against the existence of an ideal free market is centered on

government influence on such markets. In this regard, critics argue that government intervention

is necessary in any market in order to rectify certain market failures, and hence negating the

argument that free markets exist in practice (Ebeling). Particularly, the government regulation

ensures even exploitation of investment of public goods in order to benefits both the current and
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future generations within the economy. Similarly, the government regulation also ensures that

the prices charged on services and goods are consistent with the benefits or costs associated with

such services and goods (Ebeling). Without any form of government regulation, producers and

sellers may exploit the public by charging exorbitant prices on their merchandise that does not

truly reflect their product and service offerings’ costs and anticipated benefits.

Still on the minimal government influence inherent in the so-called free markets, the

government is also required to control the type of competition occurring in the market economy.

This control negates the premise that a free market is characterized by free competition. It is

noteworthy that market competition is critical in the free market as a capitalist market (Ebeling).

Such competition enhances creative innovation, which in turn serves as the means through which

demands and supplies are coordinated. However, if left unchecked by the government, market

competition can be a dehumanizing and cruel endeavor that focuses on unnecessary desires and

needs. Similarly, unchecked competition can also evolve into unfair and wasteful competition

characterized by monopolies whose aim is to serve their self-interests at the expense of the

public interest. As Ebeling posits, competition encourages selfish disregard for the public interest

while misallocating “resources from their most important socially-valuable uses.” The

implication of such argument is that checks and balances are critical to curb wasteful

competition, and thus there is no truly free competition. Particularly, antitrust legislations are

needed to collusion among competitors.

In additional, critics also hold that an ideal free market is a utopia since the government

often levies taxes on the individuals and corporations involved in the open market. Taxation

would have been nonexistent if we had ideal free markets. In practice, the government has power

as a currency monopoly to tax the country’s general population. The authority to levy taxes on
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the general population makes the government a currency monopoly in the sense that it must

specify which currency or currencies that the taxes will be paid (Agbek 2). This occurs in the

market systems with more than one competing currencies. As such, the population ends up

preferring the currency/currencies chosen by the government over other currencies since any

individual or corporation participating in any form of economic activity within the country must

pay taxes using such currencies/currencies (Hayek). To this end, it is evident that an ideal free

market is just a utopia owing to the fact that the general population must pay taxes to the

government.

In addition to its monopoly in choosing the preferred currency, the government also has a

monopoly in creating the currency. Contrary to the premise those individuals in a free market

have a freedom of choice of their preferred currency; the government not only creates but also

decides the type of currencies that are allowed to circulate within the open market. Particularly,

Milton Friedman and Adam Smith held that free consumer choice is better compared to

governing planning and control, except in the dimension of financial intermediation and money

(Selgin 287). Consistent with this belief, governments across the world have unlimited and

virtually absolute authority over their respective monetary systems (Ebeling). Overall, it is

impossible to attain freedom of choice over a country’s national currency and hence a truly free

market. This is because the government cannot entrust the responsibility of printing and minting

currency to private individuals or groups since they will abuse the printing press in their quest to

gain political advantage, privilege, and power.

Furthermore, a truly free market is unachievable because of the need for the central

banking system. According Simpson, a free market is the one that adopts laissez-faire capitalism

in its banking system (142). The government’s sole role in a free market is to protect the
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general population from fraud and force rather than controlling the national monetary system

through the central banking system. In contrast, an ideal free maker is just a utopia by virtual of

the fact that governments often controls and heavily regulate their respective countries’ banking

systems through the rules and regulations issued by the central banks (Simpson, 142).

Particularly, the governments through the central banks dictate the exchange rates and interest

rates as well as create reserve requirements.

In conclusion, it has been established that an ideal free market remains a utopia since

such market cannot be achieved due to the central authorities’ control in terms of minimal

influence from the government, taxes levied on the general population, currency creation

monopoly, and central banking system. Particularly, the government must intervene in the so-

called free market to prevent any possible market failures that might disproportionately affect a

certain part of the society. It must also intervene to prevent the possibility of wasteful and unfair

competition. Moreover, the government also needs to not only levy taxes on companies and

individuals but also dictate the preferred currency in which such taxes are paid. Finally, central

banking system is necessary to regulate the flow of money within an open economy. Overall, the

current free market is not true free considering the minimal government intervention in the

economy.

Work Cited

Agbek, Norbert N. “On the Characteristics of the Free Market in a Cooperative Society, ” 2015,

https://arxiv.org/ftp/arxiv/papers/1506/1506.03917.pdf
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Ebeling, Richard M. “Creativity and Competition Are the Heart of Capitalism.” Foundation for

Economic Education, December 17, 2017, https://fee.org/articles/creativity-and-

competition-are-the-heart-of-capitalism/

Ebeling, Richard M. “Government Monopoly vs. Personal Choice of Money.” Foundation for

Economic Education, 2017. https://www.fff.org/explore-freedom/article/government-

monopoly-money-vs-personal-choice-currency/

Hayek, F. A. “Denationalization of Money,” Foundation for Economic Education, 2015.

https://fee.org/resources/denationalization-of-money/

Marshall, Shelley. Fair Trade, Corporate Accountability and Beyond: Experiments in

Globalizing Justice. New York: Rutledge, 2016.

Selgin, George. “Milton and the Case against Current Monopoly.” Cato Journal, vol. 2018, no. 2

(2008), pp. 287-301.

Simpson, Brian P. Money, Banking and the Business Cycle. New York: Palgrave Macmillan,

2014.

Zupan, Mark A. “The Virtues of Free Markets.” Cato Journal, vol. 31, no. 2(2011), pp. 171-198.