What Does “The Free Market” Mean?

According to Michael Hudson, it means today almost the polar opposite of what it mean when Adam Smith used the phrase in The Wealth of Nations.

In an interview during an episode of the podcast Guns and Butter, Michael Hudson spoke of a book he wrote titled J is for Junk Economics: A Guide to Reality in an Age of Deception.

In that interview he makes the following claims:

At the time Adam Smith wrote his famous book, the word rent was used to describe unearned income. Income you received because you owned something.

Rent was paid for the use of land. Interest was paid to people who owned bonds. Dividends were paid to people who owned stocks.

People who sought out rent, were called rent seekers.

Unearned income was (and still isn’t) the result of any form of production, and for that reason, Adam Smith and his contemporaries considered them to be economic parasites.

It was understood they don’t add value to an economy, the extract it.

As rent seekers were considered to be economic parasites, it was important rent-seeking activities be kept to a minimum.

The phrase “free market” referred to keeping the market free from rent-seekers.

And how did Adam Smith propose that be accomplished?

Through rules. Through regulations. Through government structuring the rules of the market. What we today might call “intervention”.

Then, during or shortly after WW1, the phrase “free market” was defined to mean free from government regulation, thereby increasing freedom for rent-seekers.

So the term “free market” mean from meaning freedom FROM rent-seeking, to freedom FOR rent-seeking.

This was done (as you might guess) by people intending to pursue rent-seeking activities.

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