- published: 27 Jan 2012
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A free market is a market where prices are determined by supply and demand, with little or no government control. Free markets contrast with controlled markets in which prices, supply or demand is directly controlled. Various economic theories require specific properties of free markets, for example, a perfect market with perfect information and perfect competition. Regulation which does not affect these specific properties can be in place without disqualifying the market as free under supply and demand.
Although free-markets are commonly associated with capitalism today, free markets have been advocated by socialists and have been included in various proposals for market socialism where market allocation of capital is combined with self management in enterprises, and employee-owned cooperatives or publicly owned enterprises operate in free markets.
In the marketplace, the price of a good or service helps communicate consumer demand to producers and thus directs the allocation of resources toward satisfaction of consumers as well as investors. In a free market, the system of prices is the emergent result of a vast number of voluntary transactions, rather than of political decrees as in a controlled market. The freer the market, the more prices will reflect consumer habits and demands, and the more valuable the information in these prices are to all players in the economy. Through free competition between vendors for the provision of products and services, prices tend to decrease, and quality tends to increase.[citation needed]
Milton Friedman (July 31, 1912 – November 16, 2006) was an American economist, statistician, and author who taught at the University of Chicago for more than three decades. He was a recipient of the Nobel Memorial Prize in Economic Sciences, and is known for his research on consumption analysis, monetary history and theory, and the complexity of stabilization policy. As a leader of the Chicago school of economics, he influenced the research agenda of the economics profession. A survey of economists ranked Friedman as the second most popular economist of the twentieth century behind John Maynard Keynes, and The Economist described him as "the most influential economist of the second half of the 20th century…possibly of all of it."
Friedman's challenges to what he later called "naive Keynesian" (as opposed to New Keynesian) theory began with his 1950s reinterpretation of the consumption function, and he became the main advocate opposing activist Keynesian government policies. In the late 1960s he described his own approach (along with all of mainstream economics) as using "Keynesian language and apparatus" yet rejecting its "initial" conclusions. During the 1960s he promoted an alternative macroeconomic policy known as "monetarism". He theorized there existed a "natural" rate of unemployment, and argued that governments could increase employment above this rate (e.g., by increasing aggregate demand) only at the risk of causing inflation to accelerate. He argued that the Phillips curve was not stable and predicted what would come to be known as stagflation. Friedman argued that, given the existence of the Federal Reserve, a constant small expansion of the money supply was the only wise policy.
Avram Noam Chomsky (/ˈnoʊm ˈtʃɒmski/; born December 7, 1928) is an American linguist, philosopher,cognitive scientist, historian, and activist. He is an Institute Professor and Professor (Emeritus) in the Department of Linguistics & Philosophy at MIT, where he has worked for over 50 years. Chomsky has been described as the "father of modern linguistics" and a major figure of analytic philosophy. His work has influenced fields such as computer science, mathematics, and psychology.
Ideologically identifying with anarcho-syndicalism and libertarian socialism, Chomsky is known for his critiques of U.S. foreign policy and contemporary capitalism, and he has been described as a prominent cultural figure. His media criticism has included Manufacturing Consent: The Political Economy of the Mass Media (1988), co-written with Edward S. Herman, an analysis articulating the propaganda model theory for examining the media.
According to the Arts and Humanities Citation Index in 1992, Chomsky was cited as a source more often than any other living scholar from 1980 to 1992, and was the eighth most cited source overall. Chomsky is the author of over 100 books. He is credited as the creator or co-creator of the Chomsky hierarchy, the universal grammar theory, and the Chomsky–Schützenberger theorem.