P. J. O'Rourke published some post-election thoughts in the Weekly Standard in which he commented that "the free market is just a measurement." This stimulated further discussion on The Corner blog on National Review Online. I suspect that this will be a continuing discussion as the concept of markets are criticized in the wake of the current economic turmoil and recent election. I will therefore express these preliminary thoughts, in anticipation of more in depth discussion to follow:
1.) Money is simply a representation of collective opinion on the relative values of things that people either need or desire. It serves functions relating to credit, exchange of goods and so forth, but these functions are consequences of this basic fact.
2.) A market is a forum by which exchanges tht determine relative values, i.e. set prices, occurs. Markets are an inherent reality of human interaction and economic activity.
3.) A "free market" is one that is unregulated, and for this reason does not exist anywhere. A fair market is one that functions in such a way as to make markets most useful. A fair market is one that functions free from extraneous influences on good faith transactions between dealing parties. Markets must be regulated to some degree to ensure that the process of the transactions is fair, even if the transactions themselves are not. See the post on "FAIRNESS" below.
4.) Capitalism is a process by which resources are allocated most efficiently. Fair markets provide a mechanism by which capitalism is able to provide resources for the generation of wealth, the management of risk, and the creation of economic growth. Capitalism is inherently competetive.
5.) Competition is simply a method of optimization, the most desriable outcome of which is efficiency, i.e, competition inherently favors more efficient processes over less efficient ones.
6.) Efficiency is the amount of something desirable or needed that is produced per unit of something else that is either desirable or limited.