Since at least the time of Adam Smith, people have been debating the matter of free markets. Grossly oversimplying matters, the idea is that if the folks who are involved in economic exchanges are left unregulated, the interplay of the “market forces” will result in an overall positive result. Competition, it is claimed, will lead to better and cheaper products and this means that via the power of the invisible hand, everyone will win.
Of course, the free market of this sort tends to not need to a better world for all. Rather, the result tends to be the creation of monopolies as the most ruthless, cunning, and lucky assimilate or destroy the competition. The stock example of this is, of course, the robber baron era of the United States. Folks also point to the fact that the United States economy was in a constant turmoil of surges and recessions during the halycon days of yore. Naturally, people also point to the deregulation of the 1990s and early 2000s as contributing factors to the ecomonic mess we are in these days.
Since at least the time of Marx, people have also been critical of the free market and have instead urged for a controlled market. The more extreme folks have even pushed for real socialism (state ownership of business and industry). These folks usually claim that this will be better for everyone by eliminating the evils of the free market.
Of course, when we look at many of the socialist and allegedly communist countries, we tend to see rather poor economies. While folks often point to Europe as an example of the success of socialism, these countries are not (despite the cries of the right) true socialist states.
The fact that totally free markets and totally controlled markets are recipes for disaster should hardly be surprising. After all, looking outside of economics reveals that total freedom and total control always seem to spell disaster.
For example, consider the matter of law. If there was no law and no enforcement of law, we’d be in what thinkers like Hobbes and Locke called the state of nature. While Locke painted a pleasant picture of this state and Hobbes cast it as a nightmare, both men agreed that a state without laws would be undesirable. Empirical evidence also reveals that if we consider what occurs when law and authority fail. Somalia is, of course, one modern example.
On the opposite end of the spectrum, states that attempt to repress and oppress their citizens, create horrific states. North Korea is an excellent example of this.
Most folks need, as thinkers such as Aristotle and Hobbes have argued, to be kept in check by laws and punishments. This is because most people are not ruled by ethics or reason, but are ruled by desires. To think that the economic realm is magically exempt from this is a delusion of extraordinary magnitude. This is especially true when you consider the obvious: people really like wealth and will often do awful things to get it. So, leaving people unregulated as they try to get rich is an alarmingly stupid idea. As such, people need to be regulated in their economic activities as well.
That said, what makes life valuable is freedom. Mill argues quite eloquently for this in his writings on the subject of liberty. Freedom is also important in allowing people to be their best. As the free market folks and any athlete will tell you, competition does lead to improvement. Of course, as any athlete will tell you, the competition has to governed by rules. Being a runner, I think that the sports analogy is quite a good one.
In a race, everyone is free to compete to the limits of their abilities. This competition drives people to do their best. Likewise, economic freedom provides people with the motivation and operating room they need to excel. Races are, of course, governed by rules. You cannot kill other runners, use a car, make use of illegal drugs and so on. This keeps the race from degrading into something nasty. Likewise, economic activity needs to be governed to keep it from going from a progressive activity to a destructive nightmare.
As in general law, the challenge is to find that right balance: enough freedom so that people are not repressed, oppressed and unable to be their best. But, enough regulation so that people cannot get away with doing wick and destructive things. That ideal balance is crucial to having a healthy society and a healthy economy.