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KEY TAKEAWAYS
A free market is one where voluntary exchange and the laws of supply
and demand provide the sole basis for the economic system, with
minimal government intervention.
A key feature of free markets is the absence of coerced (forced)
transactions or conditions on transactions.
Nobody invented the free market; it arose organically as a social
institution for trade and commerce.
While some free-trade purists oppose all government intervention and
regulation, certain legal frames such as private property rights, limited
liability, and bankruptcy laws have helped stimulate free markets.
The oldest known media of exchange were agricultural goods—such as grain or Advertisement
cattle—likely as far back as 9000 to 6000 B.C. [1] It wasn't until around 1000 B.C.
that metallic coins were minted in China and Mesopotamia and became the
first known example of a good that functioned only as money.
Private property has existed long before written history, but important
intellectual arguments in favor of a private system of ownership of the means
of production would not be made until John Locke in the 17th and 18th
centuries. [3]
These business owners own all of the tools, machinery, and other resources
used in production, and keep the majority of the profits. In turn, they hire
employees as labor in return for salaries or wages. Labor does not own any of
the tools, raw materials, finished products, or profits—they only work for a
wage.
On the other hand, a free market describes how the laws of supply and
demand will be affected by the decisions of economic actors. A free market
may describe the behavior of consumers in industrial capitalism, but it can also
refer to the interactions between traders in preagricultural societies.
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