A free market is a self-regulated economy that runs on the laws of demand and supply. In a truly free market, a central government agency does not regulate any aspect of the economy. By removing government regulations, the nature of the free market forces businesses to provide superior products and services that address consumers’ needs.

A free market economy, with its principles of voluntary exchange, competitive markets, the role of supply and demand, the profit motive, and limited government intervention, provides a powerful framework for understanding the dynamics of capitalism.

The “free market” is a cluster concept; markets are free to the extent they realize a set of related properties, such as robust protection for property rights, sound money, a relative lack of government interference or control, and widespread decentralization of economic decision-making.

A market economy has several key qualities. Private ownership of resources. Individuals, not the government, own or control the means of production, distribution, and exchange of goods, as well as the labor supply. Thriving financial markets. Commerce requires capital.

Free markets are theoretically optimal, with supply and demand guided by an invisible hand to allocate goods efficiently. Free markets can be subjected to manipulation, misinformation, and asymmetries of power and knowledge, and can foster wealth inequality. Regulation aims to balance the virtues of free markets against their pitfalls.