NPR recently replayed an episode of its Planet Money radio program focusing on an annual New Hampshire libertarian festival. While listening to this segment, it was hard to ignore the flawed assumptions that some of the interviewees espoused.
Oftentimes, individuals extolling free markets demonize government intervention. A man interviewed during the Planet Money segment explained the natural safeguards of the free market, believing if someone sells you a bad product then no one will buy their goods again — problem solved. However, it doesn't take an FDA analyst or 19th century small town resident to realize that reliance on reputation alone isn't enough to protect people from clever charlatans. Moreover, free market critiques of government rarely mention the uncompetitive practices of private individuals and organizations, which throughout history have had just as much if not more influence on markets than government intervention. The fact that perfect competition is extremely rare both in modern times and throughout history, and is easily manipulated by the powerful and wealthy, makes the belief in free markets as the cure for all economic ills a misguided and idealistic philosophy.
Long before the impetuous President Theodore Roosevelt's antitrust crusades, the monopolistic tendencies of individuals, firms, and nations had produced negative consequences for consumers and society. Naval prowess allowed the British to colonize parts of Asia, Africa, and the Americas and establish corporations turning once sovereign lands into foreign subsidiaries. Standard Oil's unfair business practices allowed it to increase market share, allowing for rent seeking. In the late 1800s, global trade transpired at levels that haven't been approached until modern times, but this commerce was dominated by large firms and at the turn of the century income inequality was at some of the highest levels since income statistics have been compiled. The establishment of the WTO has given firms and nations recourse to combat unfair trade measures, however prohibited tactics such as underpricing goods are hard to prove and therefore require continued vigilance to combat. Barriers to entry are also detrimental to society as well. Entrenched firms oftentimes lobby for unnecessarily burdensome regulations to prevent competition. Better vetting of regulators is needed to limit instances of conflicts of interest.
Negligent and malicious conduct by private actors can also have other negative consequences on society besides limiting the positive social impacts of competitive markets. The fact that a large segment of the population daily eats food grown by farmers miles away and/or ingests mass-produced pharmaceuticals firmly establishes the need to ensure consumers are protected from bad and negligent actors. The impact of certain industries on many key aspects of society and public health creates public support for oversight. Global trade is dependant on the enforceability of rules striving to promote fair competition, and without them countries would resort to the type of protectionist measures that reduced international trade flows during the early 20th century.
Smart regulations ensuring competitive markets facilitate increased global trade and greater economic cooperation. The goal is to promote fairer competition, which will allow the most innovative and efficient firms to prosper. In an idealized world, one would be able to take everyone at their word and expect compensation as a result of injury, negligence, or uncontrollable circumstances. A libertarian festival may be a great place to meet like-minded individuals, but I would advise using caution before buying food from unlicensed vendors. The free market can't always protect you from food poisoning, and by the time you realize it's not a good idea to eat that merchants food again, it's already too late.