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Free Market Economy

Why Regulation is Necessary for Free Market Anarchy

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When Apple first came out with the shuffle feature for their iconic MP3 player, the Ipod, consumers complained that it didn’t “feel very random.” This feeling showed just how many people have a fundamental misunderstanding about what ‘random’ really means. Among millions of consumers, a song appearing twice in a row, an artist appearing three times in a row, or even a genre five times in a row, are consistently occurring possibilities in the realm of the random. Yet, if randomly tossing five dice resulted in the outcome of five “5s,” it might not feel very random. In actuality, the outcome was completely random. What consumers actually wanted out of Apple’s shuffle feature was not pure randomness; but rather to be surprised by the next song.

Since humans naturally and instinctively pick up on patterns, any random string of songs might be categorized in the brain according  to genre, artist, album, or even subject. Appealing to consumer demand, Apple was able to create an algorithm which specifically deterred patterns. Steve Jobs stated: “We’re making it (the shuffle) less random to make it feel more random.”

Using this algorithm as an example of market regulation, an Austrian economist might take note: the reason why government regulation consistently fails, is because the regulations are created in correlation to universal assumptions and predicted outcomes. No matter how complex, however, it is impossible to predict the nature of the market and impossible to regulate under the assumptions of human behavior. Yet, the types of regulations which ought to actually work are those which foster competition and maximize freedom. In other words, making the market less free to make it feel more free. That being said, there must be a clear distinction between creating regulations and creating a self-regulating structure.

difference-between-free-market-and-capitalism

There are intrusions, most often by the state, that inevitably defer the free market’s ability to regulate itself. It is the choices of the consumers which invariably regulate the market regardless of government intervention. If the choice of the consumer is taken away – the market fails – inevitably from the in-viability of state regulation. Authoritative regulations may thus serve to undermine the power of the consumer whom they exist to protect I dare challenge previously held notions of anarchy and suggest a system in which the consumers are preemptively assured regulating authority. 

Those who understand the inseparable freedom of human nature, should understand that the elimination of the state, as much in favor of individual sovereignty it may be, need not necessarily be achieved to secure market freedoms Instead, we, the people, may entrepreneur fixed market regulations to the benefit of our own. Amazon, Uber, and Kickstarter are all integrations which impose “regulations” upon the market–within the market itself. For this reason, it is the job of those capable to utilize what exists of the free market to create these regulatory systems.

For example, reverse engineering some of the mainstream e-commerce platforms, such as Amazon, to enable third-party buyers rather than third-party venders. In other words, allow buyers to request goods and services upon which the market competes to sell.  This type of reverse auction would manipulate market actors’ drive to profit by any means necessary. As was seen in the housing market, increase in supply and demand due to cost-incentive motivations created a boom of artificial growth. The wide-scale competition in an e-commerce-based reverse-auction, would likewise increase demand which would further incentivize markets to increase supply for opportunities in the new market. The unpredictability of winning the service of the consumer would create seasons of excess demand and excess supply due to the unpredictability of the market. In time, the quality of the services would also dictate the prices the consumer is willing to pay in comparison to higher quality markets.

Finally, as a preemptive response to left-wing critics, I would argue that the citizens have a duty to create or request the authority of the state to temporarily intervene in specific markets under strict rules on case to case bases. When and if market failure occurs — a regulatory body may be a quicker and more timely option than waiting for the market to fix itself.


This piece solely expresses the opinion of the author and not necessarily the organization as a whole. Students For Liberty is committed to facilitating a broad dialogue for liberty, representing a variety of opinions.

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