Private Market

In public administration, economics, and political science, this term is essentially synonymous with the term free, or private, market, in which goods and services are both owned and exchanged without excessive government regulation or restriction. The antonym for this market is a command economy, in which government controls the means of production as well as all decisions in relation to production, distribution, and pricing. The private market operates on the simplest basis through supply and demand. Goods are allocated on the basis of who can pay, not what the state commands. The pure free market theorists even oppose taxation. Markets emerge as a result of certain economic decisions made by the producers of goods and services. Adam Smith and his intellectual descendants declare that such an economy results in spontaneous order, where the “invisible hand [which] promotes an end … by pursuing his own interest … promotes that [end] of the society more effectually” (Smith, The Wealth of Nations, 1776). Such a market is closely associated with the laissez-faire philosophy. In such capitalistic economies, the private market or sector takes on the responsibility for genera ting new wealth, businesses, technological develop ments, and higher standards of living. Influential economic theorists such as Ludwig von Mises and Frederic von Hayek believe that free markets are natural to a free society. In practice, however, the free or private market is an ideal or normative value. In reality, markets cannot operate in a society without some regulation against fraud and deceit. The government must provide a legal and political environment in which businesses can function freely. When government steps back, as it had done in the United States in the late 20th century, the market is open to manipulation and criminal activity. The 2008 economic collapse illustrates well the results of the irresponsible economic deregulation that began during the Jimmy Carter administration (1977–1981), picked up steam under Ronald Reagan (1981–1989), was abetted by the policies of both George H. W. Bush (1989–1993) and Bill Clinton (1993–2001), and finally reached its nadir, ending in almost total financial collapse, with the reckless economic policies of George W. Bush (2001–2009). For example, the financial crimes of free-market buccaneers in the early 21st century, with their sophisticated but mainly fraudulent financial instruments and outright large-scale con games and theft, brought the American financial and economic system to near meltdown and financially ruined millions of pensioners, businesses, charitable organizations, and institutional endowments.

Private-market value is another use of the term. This usage refers to the value of the parts as opposed to the whole of any economic entity. For instance, when a company is being taken over, analysts look at the value of its component parts to determine its real value. For more information, see Hayek (1944), Mises (1922/1951), Petsoulas (2001), and Smith (1776/2007).