Free Enterprise fundamentalists

The Free Enterprise fundamentalists theorize that:

The Free Enterprise system optimizes a society's economic welfare and therefore any other economic system is sub-optimal and is less beneficial.


I believe that there are a number of questions:

1) Which type of Free Enterprise system?

  • Fe.0 - Anarchy - There is no government involvement in the economic system, i.e. no protection for private property or against violence with respect to property

  • Fe.1 - Libertarian - The Government manages a court system that adjudicates contracts and natural law protection against theft and a legal enforcement system that enforces the judgements of the court.

  • Fe.2 - Communal - The Government provides the "Essential" common services, e.g. Defense, Police, Fire, Local roads, And??? (Note: Services that can be reasonably provided by private agencies, either by voluntary individual funding with some regulation or subsidies will generally be reserved for Fe.3+?)

  • Fe.3 - Regulatory - The Government passes laws that are meant to express the costs of dis-economies, market failures, and common understandings, and these are also judged and enforced.

  • Fe.4 - Re-Distributional - The Government determines that the poorer are not getting essential services or their "fair" share of the GDP and thus Taxes the richer to either provide the services or income to the poorer

  • Fe.5 - Planned - The Government determines future costs and benefits and Taxes and Subsidizes to decrease or increase activity in coordination with these determinations.
  • Fe.6 - Socialist - The Government owns and runs the major industries.

  • Fe.7 - Communist - The Government owns and runs the businesses and directs the employment of the citizens.

2) What is the definition of society's economic welfare?
  1. GDP
  2. Maximum median income/wealth
  3. Maximum lower 1/10 income/wealth
  4. Jobs -- NO
  5. Size of Government -- NO
and of course what time period should be considered, tomorrow, 10 years, a generation

3) What other assumptions are required to prove the theory?
  1. Homo Economist
    1. Full information
    2. Rational consideration of present value
    3. etc?
  2. Static, Monotonic, ?Gaussian? Supply and Demand functions
  3. Lack of Chaotic system
  4. Lack of monopolies and irrational nations

Open Questions

  1. Are there significant benefits to having small, diverse companies rather than large mega companies that man be balanced against some synergy?

  2. Are there significant benefits to having continuing existence on companies that may be balanced against increased efficiency of newer companies



  1. Failure to "clear" labor market

  2. Instability of markets and general economy

  3. Lack of "sharing" of productivity growth, Income spread and median income does not increase

  4. Dis-economies, Elimination of Commons

  5. Insufficient investment and concern in the future


Possible causes

  1. Black swan

  2. Fooled by Randomness

  3. Missing and asymmetric information

  4. Behavioral economics
    1. Excessive value for present

  5. Arrows impossibility theory