History of the Market Economy

About the Market Economy

The free-market system referred to the market economy in which individuals freely trade with one another and where supply and demand for goods and services result in an “invisible hand” that maintains order.

Individuals and businesses are free to do as they like in a totally free market, with little or no government involvement or regulation.

Since humans began to trade with one another, the market economy has existed in many forms. Free markets, like language, emerged as a natural process of social coordination.

No one person or group of people originated voluntary exchange or private property rights, and no government devised or implemented the first use of money as a medium of exchange.

Background

Humans traded with one another even before they had money. This has been documented for far longer than recorded history can account for. Initially, trade was informal, but economic actors understood that having a monetary means of exchange would assist expedite these advantageous exchanges.

While traces of banking institutions may be found in early Mesopotamia and ancient Rome, the notion would not resurface in Europe until the 15th century. This was not without opposition; the church had already denounced usury.

Merchants and rich explorers gradually began to affect the way people thought about commerce and entrepreneurship.

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