An optimally working free markets is perhaps one of the most beautiful designs of social organisation ever devised by the human brain. But, what exactly is an optimally functioning free market? It would be quite a contradiction in terms to state, that there is something called, an absolutely free market. This is understood to mean a market absolutely free of regulation, which in effect would mean as them being, outside the ambit of law itself. Free market is understood in opposition to the government regulated economy, like in a socialistic system, where the government controls the the whole or large parts of the economy. All economies inherently have to work within some form or the other of rules and regulations, it cannot be otherwise. Therefore, the term as understood should be that free market is not the absence of regulations, but the absence of governmental interference, which here means transgressions by the state by the misuse of official power, economically or otherwise.
To talk about free markets without taking into account principle of social organisation they operate in, would grossly understate the power of the market, to bring about the most efficient and equitable distribution of resources among the people. Today we can only normatively speak, about free markets. There are no examples of free markets today, unfettered from government over- regulations and interferences. Left to its own devices, the market suitably addresses the question of distribution and allocation. It is only when, there is undue interference in the market mechanism that the markets behave in aberrations. Any form of government interference, by means of subsidies, undue benefits, crony behaviour or favouritism and most importantly the failure of the government provide it in most basic function of justice delivery to the people in an event coercion, the markets start to fail.
To imagine a free-market economy within unfree governmental and political sphere is a wishful fantasy. It is only in the presence limited government by the people who have fundamental rights and access to justice the market can efficiently operate. In a free-market every transaction that is acted upon by the agents is a contract. And it is the watchful eye of the justice system which can restore this aberration in an event of the breach of those contracts. Without a free political structure there is no possibility for free market to operate in. The more unfree a society is in its political sphere, the more regulated the markets will be.
In highly regulated economies, planning by the government plays a very important role. The question, however is not what to plan? But who plans for whom. When planning is done by the government, this scarce economic resources are utilised in a wasteful manner with very high transaction costs. However, individuals within a market always plan in the most efficient way taking into consideration the interests of all the players, for their mutual benefits. However the role of the government is to keep a watchful eye on the market through minimal regulations, in order that the opportunity and the fields are levelled for everyone irrespective of the economic status or any other form of disability – to provide for equality of opportunity.
The most important aspect of free markets is that it gives agents a choice to adapt to the preferred patterns of their lives. With free markets also comes a free and open society. The strain of totalitarianism is almost non-existent in these open societies. The people are generally more productive and healthy. Every person can choose the means, subject to being accountable to the rules of the operational sphere, in pursuit of their individual happiness, which in turn leads to happiness for all.