Is Britain a Free Market Economy?

Abstract

A market is not a place, but a situation; a situation in which sellers and buyers are in contact, able to accept a price and to offer a price. Markets are of two broad types, product markets and factor markets. In product markets goods and services are supplied by firms and demanded either by other firms or by consumers. In factor markets the four factors of production — land, labour, capital and enterprise — are supplied by their owners and demanded by firms which wish to use them to make goods and to provide services. Commodity and financial markets are specialist factor markets, in some of which a large proportion of the business is done not for use but for speculation.

The price system ... under competition ... enables entrepreneurs, by watching the movement of comparatively few prices ... to adjust their activities to those of their fellows ... the price system will fulfil this function only if competition prevails ... if the individual ... has to adapt himself to price changes and cannot control them.

(F.A. Hayek, The Road to Serfdom, Routledge, 1944, p. 36)