Saifedean Ammous Explains:

By definition, a free market is one in which transactions occur consensually between two parties, based on mutually agreed-upon terms, without interference from outside forces. If you and I agree to exchange ten dollars for a book, that is a free-market transaction. Any intervention—whether it mandates a minimum or maximum price, or requires that part of the payment be handed over to a third party—is, by definition, no longer a free market.

That said, a free market doesn’t necessarily imply the absence of all regulation; rather, it means the absence of government-imposed regulation. Regulation can still exist in the form of market-driven oversight. For instance, we already have private agencies that rate cars, restaurants, or universities. There’s no reason similar market mechanisms couldn’t apply to other sectors, including healthcare. These private regulatory entities would build reputations for their credibility and expertise, ensuring accountability through competition.

When it comes to the U.S. healthcare system, however, it’s important to note that it’s far from being a free market. Take, for example, the role of pharmaceutical companies. The industry operates within a heavily regulated framework that primarily benefits lawyers and executives rather than researchers or consumers. Drug development is highly profitable because of government-granted monopolies—such as patents and exclusivity rights—rather than true market forces. Moreover, the lengthy and costly FDA approval process, which can take over a decade and cost upwards of a billion dollars, makes it nearly impossible for smaller players to bring innovative treatments to market. This effectively consolidates power among a handful of large pharmaceutical companies.

The problems in U.S. healthcare, like over-prescription of opioids or aggressive pharmaceutical advertising, are not products of the free market. Rather, they stem from government interventions and monopolistic structures that distort incentives. A true free market, driven by competition and voluntary oversight, would likely address many of these issues by fostering innovation and reducing costs.

The key misconception is that regulation is inherently synonymous with government intervention. Regulation can and does arise organically within free markets, where businesses and organizations establish trust, credibility, and standards to attract consumers. The question, therefore, isn’t whether there should be regulation, but rather who should provide it—government agencies or market-driven entities.

Saifedean Ammous