Free markets never existed outside economic textbooks
The “free market” is capitalism’s most successful fiction. Not because markets don’t exist, but because truly free ones never have.
Every market that has ever functioned has been shaped, constrained, and directed by power structures that economic theory conveniently ignores. The abstraction serves a purpose: it legitimizes existing arrangements while concealing the mechanisms that actually govern economic life.
The textbook delusion
Economic textbooks present markets as natural phenomena that emerge when rational actors meet to exchange goods. Perfect information, no transaction costs, infinite participants, complete mobility. These assumptions aren’t simplifications—they’re fantasy.
Real markets require legal frameworks, enforcement mechanisms, information asymmetries, barriers to entry, and concentrated capital. They need governments to define property rights, courts to enforce contracts, and police to protect private property. None of this appears in the elegant supply-and-demand curves.
The textbook market is a thought experiment that became ideological dogma.
Markets as power arrangements
Every historical market has been a specific arrangement of power relationships.
Medieval guilds controlled who could practice trades and at what prices. Colonial trading companies had state-granted monopolies over entire continents. The early industrial markets were built on enclosure laws that forced peasants into wage labor. Modern markets operate through corporate hierarchies, regulatory capture, and financial market manipulation.
At no point in this history do we find the theoretical “free market” where anonymous participants meet as equals to exchange goods based on pure economic calculation.
The ideology of inevitability
The genius of free market ideology lies in its claim to natural inevitability. Markets aren’t presented as human institutions that could be organized differently, but as expressions of natural law that must be obeyed.
This naturalizes existing distributions of wealth and power. If markets are natural, then market outcomes are natural too. Inequality becomes a law of nature rather than a political choice.
The ideology transforms what is essentially a political question—how should we organize economic life?—into a technical question about market efficiency.
Who benefits from the fiction
The free market myth serves specific interests. It provides moral legitimacy for wealth concentration by suggesting that fortunes are earned through superior market performance rather than inherited advantages or systemic manipulation.
It justifies deregulation by portraying government intervention as distortion of natural processes. It deflects criticism of corporate power by suggesting that markets, not corporations, are really in control.
Most importantly, it makes alternatives seem impossible by presenting current arrangements as the natural order.
The real mechanisms of control
Actual markets are controlled through:
Information asymmetries - Those with better information extract value from those without it. Financial markets are essentially information arbitrage systems.
Network effects - First movers build self-reinforcing advantages that prevent competition. Platform companies exemplify this dynamic.
Capital requirements - Markets favor participants who already have capital. Wealth begets wealth through compound advantages.
Regulatory capture - Large players shape rules to benefit themselves and exclude competitors. The revolving door between corporations and regulatory agencies isn’t corruption—it’s system design.
Market making - Major players don’t just participate in markets, they create them. Investment banks, for instance, both trade securities and underwrite the companies issuing them.
None of these mechanisms appear in textbook models, yet they determine actual market outcomes.
The performativity trap
Economic theories don’t just describe markets—they create them. When MBA programs teach textbook models, they produce managers who try to implement those models. When policy makers believe in market efficiency, they design regulations accordingly.
The theory becomes reality through institutional enforcement, not because it accurately describes natural phenomena. “Free markets” exist only to the extent that enormous institutional apparatus maintains the illusion.
This creates a performativity trap: the more successfully the ideology is implemented, the more it appears to validate itself.
Historical alternatives
Markets organized on different principles have existed throughout history. Medieval Islamic markets operated under different concepts of fair price and profit. Many indigenous societies had elaborate trading networks without individual property rights. Socialist markets separated ownership from management.
These aren’t primitive precursors to “real” markets—they’re evidence that markets can be organized in fundamentally different ways depending on underlying values and power structures.
The current system isn’t the culmination of economic evolution. It’s one possible arrangement among many.
The value extraction system
What we call “free markets” are actually sophisticated value extraction systems. They channel wealth from productive activity toward financial speculation, from labor toward capital, from periphery toward center.
This happens through mechanisms that would be impossible in truly free markets: monopoly pricing, rent-seeking behavior, externality dumping, and systematic information manipulation.
The system requires constant intervention to maintain these extraction patterns. “Free market” policies almost always involve government action to protect existing privilege structures.
Beyond the binary
The critique of free markets doesn’t lead automatically to state control. Both “free markets” and “central planning” are abstractions that obscure more interesting possibilities.
Real economic organization always involves complex mixtures of market mechanisms, state intervention, community cooperation, and institutional coordination. The question isn’t whether to have markets, but how to organize them and in whose interests.
Different values lead to different market designs. If we valued economic security over growth, markets would look different. If we prioritized sustainability over efficiency, different mechanisms would emerge.
The axiological dimension
From an axiological perspective, “free markets” represent a specific value hierarchy disguised as value neutrality. They prioritize efficiency over equity, competition over cooperation, individual choice over collective welfare.
These aren’t natural or inevitable values—they’re historical choices that benefit particular groups at particular moments.
Recognizing this opens space for different value commitments. Markets organized around different principles—sustainability, community resilience, human development—would generate different outcomes.
The first step is abandoning the fiction that current arrangements represent natural law rather than political choice.
Implementation reality
Even self-proclaimed free market societies implement extensive market management. The United States, supposedly the pinnacle of market capitalism, has:
- Federal Reserve manipulation of interest rates
- Patent systems that create artificial monopolies
- Corporate welfare through tax breaks and subsidies
- Antitrust enforcement (however selective)
- Financial market regulation (however captured)
- Trade protection for favored industries
The “free market” rhetoric serves to legitimize this management system while concealing its true beneficiaries.
The power to define value
Markets don’t discover pre-existing values—they create them through institutional arrangements. What counts as valuable, how value is measured, who captures value—these are all products of specific market designs.
The free market mythology obscures this value-creation process by presenting market prices as objective measures of worth. In reality, prices reflect the distribution of power within existing institutional arrangements.
Different arrangements would produce different prices, different definitions of value, different distributions of wealth.
Moving beyond the fiction
Abandoning free market ideology doesn’t require abandoning markets entirely. It means recognizing markets as human institutions that can be designed differently.
This opens space for economic experimentation. Worker cooperatives, commons-based peer production, participatory budgeting, local currencies—these represent different approaches to organizing economic life.
The goal isn’t to implement some alternative grand theory, but to expand the range of institutional possibilities beyond the narrow confines of textbook models.
Real economic freedom means the freedom to organize economic life according to our actual values rather than the values embedded in inherited institutional arrangements.
That freedom has never existed. But unlike the textbook free market, it could.
The value systems embedded in our economic institutions are not natural laws but political choices. Recognizing this is the first step toward choosing differently.