Menu
Home
People
Places
Arts
History
Plants & Animals
Science
Life & Culture
Technology
Reference.org
Free market
open-in-new
<p>In <a href="/facts/Economics/HYctA2Dn">economics</a>, a free market is an economic <a href="/facts/Market_(economics)/6RfCU3fH">system</a> in which the prices of goods and services are determined by <a href="/facts/Supply_and_demand/KprL1fvc">supply and demand</a> expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of <a href="/facts/Forms_of_government/N4bYL0VC">government</a> or any other external authority. Proponents of the free market as a normative ideal contrast it with a <a href="/facts/Regulated_market/fckkfGeQ">regulated market</a>, in which a government intervenes in supply and demand by means of various methods such as <a href="/facts/Taxes/8cXNkA00">taxes</a> or <a href="/facts/Regulations/eFR0l2x9">regulations</a>. In an idealized <a href="/facts/Free_market_economy/d56S7haK">free market economy</a>, prices for goods and services are set solely by the bids and offers of the participants. </p><p>Scholars contrast the concept of a free market with the concept of a <a href="/facts/Coordinated_market_economy/uyUXCMfh">coordinated market</a> in fields of study such as <a href="/facts/Political_economy/P753k3It">political economy</a>, <a href="/facts/New_institutional_economics/njdUn9jn">new institutional economics</a>, <a href="/facts/Economic_sociology/9TNTdMNb">economic sociology</a>, and <a href="/facts/Political_science/Gqy5EoRX">political science</a>. All of these fields emphasize the importance in currently existing market systems of rule-making institutions external to the simple forces of supply and demand which create space for those forces to operate to control productive output and distribution. Although free markets are commonly associated with <a href="/facts/Capitalism/FbPc6TTw">capitalism</a> in contemporary usage and <a href="/facts/Popular_culture/cKj0ho02">popular culture</a>, free markets have also been components in some forms of <a href="/facts/Market_socialism/7YPfNDgX">market socialism</a>. </p><p>Historically, free market has also been used synonymously with other economic policies. For instance proponents of <i>laissez-faire</i> capitalism may refer to it as free market capitalism because they claim it achieves the most economic freedom. In practice, governments usually intervene to reduce <a href="/facts/Externality/hGgw7gtT">externalities</a> such as <a href="/facts/Greenhouse_gas_emissions/Cu9nXPHE">greenhouse gas emissions</a>; although they may use markets to do so, such as <a href="/facts/Carbon_emission_trading/8EzKjxEw">carbon emission trading</a>. </p>