When people talk about “free markets”, they seem to me to be referring to both a lasses-faire economy and an economy with perfect competition
Libertarian-conservative types will say something like “the United States is a free market, and in a free market people get rich by creating value.”
With respect to the laissez-faire component of a free market, the United States is certainly not a laissez-faire economy. There are massive amounts of laws and regulations which keep growing every time Congress or a state legislature meets and government spending is a significant percentage of GDP.
Libertarian-conservative types spend too much time congratulating themselves on the freedom of American markets compared to evil socialist Europe. If the former communist Soviet Union was a 10 and a completely laissez-faire economy such as Somalia or Galt’s Gulch is a 0, then probably America falls in at a 5 and Western Europe at a 5.5.
Libertarian-conservative types also have the false belief that competition flourishes only in the absence of government regulation. This is also obviously untrue. Look at Somalia. Without government to make and enforce basic laws against involuntary value transference, what happens is the toughest guy becomes a warlord and extracts resources from everyone else in his fiefdom. The social structure evolves into something surprisingly like the feudalism of the middle ages. Feudalism and not perfect competition appears to be the natural state of society in the absence of a strong central government.
Laissez-fairism did work in Galt’s Gulch, but unfortunately that was a fictional community. What completely unregulated economies have in common with totally regulated economies is that they both only work well in fiction.
The assertion that our economy has perfect competition, or anything even close to perfect competition, can easily be disproven by the existence of billionaires. In an economy with competition, no one can become super-rich, because as soon as people see someone making a lot of money, they compete against him and reduce or even eliminate his profits.
Libertarian-conservative types are in denial about American not having perfect competition. Oh yes, they will say I am attacking a straw man. “We know that perfect competition is a model which only exists in theory.” But in fact, they really do believe that our economy has something close enough to perfect competition such that the only way to make a billion dollars is to be a superman who can personally create tens of thousands times more value than the average man. To me, this sounds like something which defies the laws of nature, such as someone running faster than a speeding bullet or leaping over tall buildings. Until someone can identify the exact inhuman traits which enables Bill Gates to create tens of thousands of times more value than the average person with a high IQ, I will assume he’s the fortunate beneficiary of inefficiencies in our economic system which he exploited either unwittingly or intentionally.
I personally believe in the superiority of an economy with near-perfect-competition. The ideal society is one where the only way to make money is to create value. This can only be achieved with government laws and regulations that prevent people from making money from value transference, forcing them to create value if they want to have money. This can only happen when the primary goal of lawmakers is to achieve such a society, and of course that’s not the goal of either political party right now, and it’s not even a concept that they understand.