"Free market" is a semantic chameleon phrase; it can refer to any of the following:
- 1. a marketplace where all individuals are free to choose their transactions (free-as-in-uncoerced)
- 2. a marketplace free of any regulations or rules (free-as-in-unregulated)
- 2a. a marketplace free of any regulations or rules other than enforcement of voluntary contracts
The confusion between these differences is often exploited by free marketarians in a semantic bait-and-switch argument to reach the fallacious conclusion that regulation is bad for freedom:
- The bait: Free markets [definition 1] have been proven to be effective creators of wealth. By allowing individuals to seek the most optimal trade of value for price, such markets cull out waste and dishonesty while encouraging productive and efficient production.
- The hook: We must eliminate all government interference in order to have a truly free market [definition 2]
- The conflation: Government regulation is to blame for any lack of freedom in the marketplace, and therefore should be eliminated.
The opposite is true; regulation is in fact necessary in order to maintain individual freedom within a marketplace.
Or, more to the point: There is no such thing as an unregulated market, or even a self-regulated market. Markets must be regulated by an entity that does not participate in trade and therefore stands to gain only from success of the market as a whole rather than by dominating other traders. A market that is not externally regulated is prone to abuse by the most powerful participants, and the level of trust necessary to sustain a viable marketplace quickly collapses.