Editing Free market (section)

=== Socialism ===
{{main|Socialism}}
{{See also|Socialist economics}}
Various forms of [[socialism]] based on free markets have existed since the 19th century. Early notable socialist proponents of free markets include [[Pierre-Joseph Proudhon]], [[Benjamin Tucker]] and the [[Ricardian socialist]]s. These economists believed that genuinely free markets and [[voluntary exchange]] could not exist within the [[Exploitation (Marxism)|exploitative]] conditions of [[Capitalist mode of production (Marxist theory)|capitalism]]. These proposals ranged from various forms of [[worker cooperative]]s operating in a free-market economy such as the [[Mutualism (economic theory)|mutualist]] system proposed by Proudhon, to state-owned enterprises operating in unregulated and open markets. These models of socialism are not to be confused with other forms of market socialism (e.g. the [[Lange model]]) where publicly owned enterprises are coordinated by various degrees of [[economic planning]], or where capital good prices are determined through marginal cost pricing.

Advocates of free-market socialism such as [[Jaroslav Vanek]] argue that genuinely free markets are not possible under conditions of private ownership of productive property. Instead, he contends that the class differences and inequalities in income and power that result from private ownership enable the interests of the dominant class to skew the market to their favor, either in the form of monopoly and market power, or by utilizing their wealth and resources to legislate government policies that benefit their specific business interests. Additionally, Vanek states that workers in a socialist economy based on cooperative and self-managed enterprises have stronger incentives to maximize productivity because they would receive a share of the profits (based on the overall performance of their enterprise) in addition to receiving their fixed wage or salary. The stronger incentives to maximize productivity that he conceives as possible in a socialist economy based on cooperative and self-managed enterprises might be accomplished in a free-market economy if [[employee-owned companies]] were the norm as envisioned by various thinkers including [[Louis O. Kelso]] and [[James S. Albus]].<ref>[http://www.ru.org/index.php/30-economics/357-cooperative-economics-an-interview-with-jaroslav-vanek "Cooperative Economics: An Interview with Jaroslav Vanek"] {{Webarchive|url=https://web.archive.org/web/20210817073532/http://www.ru.org/index.php/30-economics/357-cooperative-economics-an-interview-with-jaroslav-vanek |date=2021-08-17 }}. Interview by Albert Perkins. Retrieved March 17, 2011.</ref>

Socialists also assert that [[free-market capitalism]] leads to an excessively skewed distributions of income and economic instabilities which in turn leads to social instability. Corrective measures in the form of [[social welfare]], re-distributive taxation and regulatory measures and their associated administrative costs which are required create agency costs for society. These costs would not be required in a self-managed socialist economy.<ref name="The Political Economy of Socialism 1982. pp. 197–198">''The Political Economy of Socialism'', by Horvat, Branko (1982), pp. 197–198.</ref>

Criticism of market socialism comes from two major directions. Economists [[Friedrich Hayek]] and [[George Stigler]] argued that socialism as a theory is not conducive to democratic systems<ref>{{Cite journal |last=Hayek |first=F. |date=1949-03-01 |title=The Intellectuals and Socialism |url=https://chicagounbound.uchicago.edu/uclrev/vol16/iss3/7 |journal=University of Chicago Law Review |volume=16 |issue=3 |pages=417–433 |doi=10.2307/1597903 |jstor=1597903 |issn=0041-9494 |access-date=2022-10-27 |archive-date=2022-10-27 |archive-url=https://web.archive.org/web/20221027052633/https://chicagounbound.uchicago.edu/uclrev/vol16/iss3/7/ |url-status=live }}</ref> and even the most benevolent state would face serious implementation problems.<ref>{{Cite journal |last=Stigler |first=George J. |date=1992 |title=Law or Economics? |url=https://www.jstor.org/stable/725548 |journal=The Journal of Law & Economics |volume=35 |issue=2 |pages=455–468 |doi=10.1086/467262 |jstor=725548 |s2cid=154114758 |issn=0022-2186 |access-date=2022-10-27 |archive-date=2022-10-27 |archive-url=https://web.archive.org/web/20221027052632/https://www.jstor.org/stable/725548 |url-status=live }}</ref>

More modern criticism of socialism and [[market socialism]] implies that even in a democratic system, socialism cannot reach the desired efficient outcome. This argument holds that democratic majority rule becomes detrimental to enterprises and industries, and that the formation of [[Special interest group|interest groups]] distorts the [[optimal market outcome]].<ref>{{Cite journal |last1=Shleifer |first1=Andrei |last2=Vishny |first2=Robert W |date=1994 |title=Politics of Market Socialism |url=https://scholar.harvard.edu/files/shleifer/files/politics_market_socialism.pdf |archive-url=https://web.archive.org/web/20140202181443/http://scholar.harvard.edu/files/shleifer/files/politics_market_socialism.pdf |archive-date=2014-02-02 |url-status=live |journal=Journal of Economic Perspectives |volume=8 |issue=2 |pages=165–176|doi=10.1257/jep.8.2.165 |s2cid=152437398 }}</ref>