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I just saw this video and I got from it that even libertarians want to regulate the free market to prevent monopolies. They criticized the anti-monopoly contracts at the beginning but then, I think I didn't quite get the alternative - the professor said that it would be better to "regulate the profits they can earn on their assets". How is that really different from the current legislative in theory?

How can the big firms fusion be constricted without harming the free market?

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  • Some of us aren't in a position where it's convenient to watch a video. You are allowed to have a link to a video if you want to, but you might get a better response if your question can be properly understood without watching a video.
    – Sam I am says Reinstate Monica
    Jun 6, 2016 at 18:20
  • Alright, I fixed your question to tone down the rhetoric, and make it make sense, but I don't understand the premise of the question. What do you mean by "regulate the profits they can earn on their assets" "How is that really different from the current legislative in theory?" What do you think the current "legislative" (sic!) is?
    – The Pompitous of Love
    Jun 6, 2016 at 18:25
  • The question is vague...but I think you're simply asking about free market concepts in general, which is simply too broad of a question.
    – user1530
    Jun 6, 2016 at 18:26

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A free market is, by definition, a market which is not regulated at all. A truly free market only exists in anarcho capitalism. Any state-imposed regulation which affects businesses means that a market is not 100% free anymore.

When you have a 100% unregulated market, then monopolies can occur under certain conditions. That's usually the case when you have a fungible product which also gets cheaper to produce the more you produce of it. When the product is fungible, companies can only compete by price, which means small competitors have no way to compete with larger ones, which means only the largest competitor can prevail.

Common regulations to prevent such monopolies are:

  • Anti-trust regulations which forbid large companies from cooperating with each other to prevent price-fixing or the largest companies from fusing into one which can then dominate the market. However, this doesn't always work because market leaders can also emerge naturally through destructive competition and price-fixing can be hard to prove.
  • Setting minimum prices to ensure that the small companies still have a profit margin which allows them to survive.
  • Force companies to sell permission to use their infrastructure to competitors at fair prices (example: a law which says that a train company must sell their competitors licenses to use their rails and train stations).

But any form of regulation means that your economy is less of a free market economy and more of a social market economy. Note that a social market economy is still different from a socialist economy. In a socialist economy, the government controls companies directly, not indirectly through laws and regulations, which means that the state becomes the monopolist and there is no market anymore.

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  • It is worth noting, that there are Anarcho-Capitalists in the Libertarian movement. IHS, the source of that video above, does not let them speak in public, because no one takes the Anarcho-Capitalists seriously and IHS doesn't want to marginalize itself. Nevertheless, if you go to IHS events you will meet Anarcho-Capitalists who demand no restriction on markets whatsoever. Most libertarian economists follow some variant of the Austrian School, or Classical Liberalism, which argues that the state/government is sometimes required to create conditions for market competition, but less is better.
    – The Pompitous of Love
    Jun 6, 2016 at 21:27

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