Why is it that no one defends free markets, and socialism, despite all the evidence of its failures, comes back again and again? Unsurprisingly, the answer lies in politics, which have always led to a boom-bust cycle of collective behaviour. Furthering our understanding of this phenomenon is timely because the old advanced economies, burdened by a combination of existing and future debt, appear to be on the verge of an unhappily coordinated bust. But that does not automatically return us to the free markets some of us long for.
Cycles of collective behaviour
Throughout history there have been few long-lasting periods of truly free markets. Contemporary exceptions are confined to some small island states, forced to be entrepreneurial by their size and position vis-à-vis the larger nations with which they trade. The governments of these islands know that the state itself is not suited to entrepreneurship. Only by the state guarding the freedom of island markets and the sanctity of property rights can entrepreneurs serve the people in these communities and create wealth for all.