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Somewhat idealistic in its concept, a free market assumes that participants do not
mislead or coerce aspects of the market price, supply, demand, do not participate in
price fixing and do not mislead investors. In actual practice history has repeatedly
shown that this ideal world does not exist, price fixing is still practiced and all
market aspects are manipulated by coercion, in the political arena as well as the
marketing to investors and the recipients of goods and services.
The precept of the free market is that government does not regulate, supply, demand
or prices. With special interests paying for political campaigns it is obvious that this
ideal is confounded by market realities and the natural tendency or desire for wealth
and power.
The publication of Adam Smith's The Wealth of Nations in 1776 is usually considered
to mark the beginning of classical economics. The school was active into the mid
19th century and was followed by neoclassical economics in Britain beginning
around 1870.
The term laissez-faire is often used interchangeably with the term "free market".
Some use the term laissez-faire to refer to "let do, let pass" attitude for matters
outside of economics.
A student of Austrian Economics and Eugen von Böhm-Bawerk was Ludwig von
Mises. George Reisman, author of "The Government against the Economy" and
"Capitalism" (wherein he endeavored to reconcile Keynesean and Austrian
economics) was mentored by Mises.
Along the lines of thought within this economic theory, Mises felt that the market
would self regulate if given free reign. In many ways he was correct but some points
seem to be missing. The model does not consider mainly the immediate needs and
desires of the businesses and the people without due consideration of long term
needs. All in all the theory is strong but fails to serve the people when weighed with
long term need. This is mainly due to the lack of foresight that desire tends to
engender.
The usual terminology of political language is stupid. What is 'left' and what is 'right'? Why
should Hitler be 'right' and Stalin, his temporary friend, be 'left'? Who is 'reactionary' and who is
'progressive'? Reaction against an unwise policy is not to be condemned. And progress towards
chaos is not to be commended. Nothing should find acceptance just because it is new, radical,
and fashionable. 'Orthodoxy' is not an evil if the doctrine on which the 'orthodox' stand is sound.
Who is anti-labor, those who want to lower labor to the Russian level, or those who want for
labor the capitalistic standard of the United States? Who is 'nationalist,' those who want to bring
their nation under the heel of the Nazis, or those who want to preserve its independence?
http://en.wikipedia.org/wiki/John_Maynard_Keynes
Criticism
Wikipedia
The Failure of the "New Economics" (1959) is a book by Henry Hazlitt offering a
detailed critique of John Maynard Keynes's work The General Theory of Employment,
Interest and Money (1936).
To refute each Keynesian error, Hazlitt expounded sound economic theory in a way
academia couldn't ignore. John Chamberlain, who reviewed the book in The Freeman,
titles his review "They'll Never Hear The End of It." The dean of the Department of
Economics at a leading university questioned Hazlitt's credentials for critiquing the
noted Keynes. Mises came to Hazlitt's defense. Hazlitt, Mises responded, was "one of
the outstanding economists of our age," and his anti-Keynes book was "a devastating
critique" of the Keynesian doctrines.
The term was coined by journalist Jude Wanniski in 1975, and further popularised by
the ideas of economists Robert Mundell and Arthur Laffer. Supply-side economics is
controversial because its typical recommendation, reduction of the higher marginal
tax rates, offers benefits to the wealthy, which commentators such as Paul Krugman
see as politically rather than economically motivated.
This may have marked the beginning of the advancement of artificial inflation. By placing
incentives to produce (supply) goods and services into the market, a host of things were inspired
to change. Legislative manipulation and even the production of things that were not needed can
easily spawn from such an idea. If the idea was introduced in 1975 and took a little while to catch
hold it may not be unreasonable to assume that this policy direct may have led to or be a
principle factor in the legislative changes that have enabled the conditions described above.
This dramatic change in incomes in the upper class was not shared even in the upper middle
class and negligible to null in the middle and lower income class segments.
Reaganomics (1981)
Reaganomics (a portmanteau of "Reagan" and "economics," coined by radio
broadcaster Paul Harvey) is a term that has been used to both describe and decry
free market advocacy economic policies of U.S. President Ronald Reagan, who
served from 1981 to 1989 and economic policies perceived as similar. A term parallel
in use and import is Thatcherism, which refers to the economic philosophy of British
Prime Minister Margaret Thatcher (1979–1990), who was Reagan's contemporary.
Reaganomics is most closely associated with neoliberal economic thought.
Today "trickle-down economics" is most closely identified with the economic policies
of the Ronald Reagan administration, known as Reaganomics or supply-side
economics. A major feature of these policies was the reduction of tax rates on
capital gains, corporate income, and higher individual incomes, along with the
reduction or elimination of various excise taxes. David Stockman, who as Reagan's
budget director championed these cuts but then became skeptical of them, told
journalist William Greider that the term "supply-side economics" was used to
promote a trickle-down idea.
When capitalized, the term Natural Capitalism usually refers to the specific set of
reforms described in 1999 by Paul Hawken, Amory Lovins, and Hunter Lovins in the
book of the same name. There is a well-developed theory of natural capital that
predates this work and some generic use of the phrase to apply to environmental
economics. The book and additional material are available online at the book's
promotion site: http://www.natcap.org/
DEFINITIONS
Market Economy
A market economy (aka. free market economy or free enterprise economy) is an
economic system in which the production and distribution of goods and services
take place through the mechanism unconstrained markets. Businesses and
consumers decide what they will produce and purchase; how much to produce, what
to charge goods and services, what to pay employees, etc. In the ideal market
economy the government does not constrain the market. Price and production are
naturally regulated by supply, demand and competition.
Generally, all economies are mixed economies combining varying degrees of market
and command economy traits. For example, in the United States there are more
market economy traits than in Western European countries.
Mixed Economy
A mixed economy Typically contains a mix of economic systems, both private-owned
and state-owned enterprises or combined elements of competing economic theories.