Subject: Re: Celebrating 250 Years in America
"One need not be in thrall to free-market fundamentalism to acknowledge that this system, despite its flaws, seems to work very much better than all the alternatives that have been attempted."

I know this is matter of semantics, but unfortunately semantics gets right to the heart of this discussion.

What is "free-markets"?

Obviously to any non-ideologue there is a lot of grey area here. Are government maintained roads (and rules of the road) free-markets? Obviously not, but most people understand why they are needed. Taken to the other end of the spectrum, what about regulations? Do regulations regarding truth in advertising ruin free market fundamentalism? Why should sellers be required to make true statements? Why can't they advertise tanks of water with a thin layer of salad oil on top as tanks of 100% salad oil (bringing this discussion on topic for all of the American Express shareholders on the board)? Shouldn't that be the seller's responsibility to figure out what is in the tanks and not require government interference? I think most people would agree that we could have some truth in advertising and fraud statutes and still be considered a free-market system.

Like everything, what it means to be a free market is based on a spectrum. On one end is lots and lots of regulations protecting people from almost everything. On the other end of the spectrum we could have a laissez faire market where anything goes with no regulation. Heck, you could stick a gun in someone's face and force them to buy your wares. No need for government interference the buyer should have protected themselves better. Corruption could be rampant, but it would be a free market.

Most people consider themselves free market believers, just to different degrees. There are those who believe any but the most basic regulations are because of communists and socialists. Then there are others who believe that anyone who doesn't want the same regulations they want must be anarchists and fraudsters. Queue the George Carlin joke about driving on the freeway. People going faster than you are maniacs, people going slower than you are idiots.

To me, I would revise your statement to be that there is no better economic system in the world than well regulated capitalism. A well regulated free market system.

Of course, that begs the question. What is a well regulated free market?

In my opinion regulations are just and warranted if they solve some of the basic problems of free markets while also avoiding creating their own problems as much as possible:

1. Tragedy of the commons. - the classic too many farmers letting their sheep graze on the common area of the town leaves it barren. This can apply to air quality, public lands, climate, water, fishing etc.
2. Free rider problems such as regulatory capture
Basically regulations shouldn't lead to a heads I win, tails everyone else loses type of situation.
3. Negative externalities - Circumstances outside of an economy can effect the economy and without decent regulations, the market will generally suffer. For example, foreign country interactions or climate effects.
4. Monopoly power - one consequence of a completely free (laissez faire) market is towards monopoly power. Winner can use their power to quash potential competitors not through competition, but through their monopoly power.
5. Asymmetric information - One party having significant difference in information over the other.

I think regulations that address these types of problems while minimizing the effect on the free trade of goods and services are the best type of regulations.

I think the person you quoted was addressing the laissez faire type of free market fundamentalism. That type of system isn't the best and works very little for most of the market participants. In fact it seems to only work best for a few market participants who can exploit some of the problems with free markets mentioned above.