When you hear the phrase “free market,” you probably think of “a market that is free from regulation.” But that’s the opposite of the phrase’s original meaning.
Adam Smith used the term to describe a market that was free from “economic rents”: money earned by owning things rather than doing things. Smith recognized that markets attract parasites – “rentiers” – who seek to drain wealth by “investing” rather than building and doing.(This) meant that, in the absence of muscular state intervention, markets would become less and less free, more and more dependent on the whims of rentiers who used money to breed money by creating toll-barriers between parts of the productive economy.
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For Smith, markets were only free if they were regulated. But that’s the opposite of the way that we talk about free markets today. Today, a free market is a market where you are free to collect rents: passive income from owning things at the expense of people doing things.
Cory Doctorow
Pluralistic.net
Permalink: The Misunderstanding Of Adam SmithProgress thus appears to be based upon economic inequalities and injustice. This defence of unearned surpluses as the incentive and the source of economic progress takes the revolutionary bull by the horns.
John Atkinson Hobson
Incentives In The New Industrial Order (1925), p. 48,