The laissez-faire principle expresses a preference for an absence of non-market pressures on prices and wages, such as those from discriminatory government taxes, subsidies, tariffs, regulations of purely private behavior, or government-granted or coercive monopolies. Friedrich Hayek argued in The Pure Theory of Capital that the goal is the preservation of the unique information contained in the price itself.
The definition of free market has been disputed and made complex by collectivist political philosophers and socialist economic ideas. This contention arose from the divergence from classical economists such as Richard Cantillon, Adam Smith, David Ricardo, and Thomas Robert Malthus, and from the continental economic science developed primarily by the Spanish scholastic and French classical economists, including Anne-Robert-Jacques Turgot, Baron de Laune, Jean-Baptiste Say and Frédéric Bastiat.
During the marginal revolution, subjective value theory was rediscovered.
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 socialists. These economists believed that genuinely free markets and voluntary exchange could not exist within the exploitative conditions of capitalism.
These proposals ranged from various forms of worker cooperatives operating in a free market economy, such as the 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.
Socialists also assert that free market capitalism leads to an excessively skewed distribution of income, which in turn leads to social instability. As a result, corrective measures in the form of social welfare, re-distributive taxation, and administrative costs are required, which end up being paid into workers hands who spend and help the economy to run. Corporate monopolies run rampant in free markets, with endless agency over the consumer. Thus, free market socialism desires government regulation of markets to prevent social instability, although at the cost of taxpayer dollars.