A free market can be defined as a market without direct government
intervention. A competitive market is more difficult to define but
economists usually have in mind some definition based upon outcomes -
something like price tending towards marginal costs and zero profits on
average. I think most economists would agree that a free market is a
necessary condition for markets to be competitive but there are big
differences over the degree of sufficiency.
Some economists in the Austrian tradition, particularly Rothbard,
either ignore competition or define it so that free markets are always
competitive.
Neo-classicals partial to laissez-faire, such as Milton Friedman,
recognize the distinction but argue in practice that free markets are
almost always tolerably competitive when they appear not to be
competitive it is usually due to government intervention (such as
tariffs) and that government intervention even if sound in theory will
usually make things worse in practice.
Good economists with a liberal leaning (e.g. Paul Krugman, Bradford
DeLong) think that most free markets are competitive (if the rules of
the game are clearly defined by governments) but that important
exceptions exist for which we need antitrust law and other occasional
government interventions.
Alex
--
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]
