FUNCTIONING MARKETS ARE A FUNCTION OF RULES:

Myth 1: the truth is that in the modern world there are very few, if any, entirely free markets - markets that do not rely on any external rules or regulations at all. Even the most devout free-market theorists recognise that property rights need to be clear, public and enforceable, and that generally means law, police, courts and other institutions of the state. Some will actively argue for patent, copyright and other laws protecting intellectual property, but these are themselves significant infringements on market freedoms.

This catalogue merely scratches the surface. In fact, there are many things that generally cannot be legally bought and sold at all: people, body parts, hard drugs, votes, court decisions, public qualifications, the outcome of sporting contests. Then there are items that in many countries can only be sold under licence: guns, alcohol, and many medicines.

There are regulations on who is allowed to work: on child labour, on immigration, on the professions and the qualifications needed to enter them. There are regulations on organisational form: companies, associations, partnerships, mutuals, cooperatives, employee-owned firms, charities. There are entry requirements for some industries, such as tests on ownership, capital and track record in banking.

And then there are rules on product safety, on weights and measures and on conditions of trade, such as the right to a refund. The global foreign exchange markets are often thought of as the nearest thing to a perfectly free market. It is true that they are astonishingly large and astonishingly liquid. The Bank for International Settlements estimated, for example, that trading averaged $5.1 trillion a day in April 2016. Yet they are also very closely bound by rules and regulations.

Myth 2 concerns how markets function. Markets are far from identical to each other, and do not all operate to a single equilibrating mechanism. Markets for food products are very different from asset markets; financial markets differ radically from labour markets; markets in primary goods are different from secondary or resale markets in those goods. [...]

Myth 3 is about culture. Markets shape our lives, our homes, our possessions - even the music we listen to. And yet, they do much more that this. They shape our expectations of others, our manners and our capacity to trust, and those things in turn shape them.

Markets are not merely antiseptic objects of expert study, or neutral tools of public policy. The people who trade in them are not economic automata operating purely in accordance with financial incentives. On the contrary, markets are subject to 'animal spirits'. These are the human passions of confidence or pessimism in the face of the unknown, as well as the human instinct to be moved by stories and narratives, and to react to unfairness or corruption.

In sum, markets constitute a created, constructed order.

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