Free-Market Anarchism: Definition & Example

Instructor: Christopher Muscato

Chris has a master's degree in history and teaches at the University of Northern Colorado.

Free markets are supposed to give people economic freedom from the government, so why bother with a government at all? In this lesson, we'll examine free-market anarchism and see how it envisions the future.

Free-Market Anarchism

Why was a free market such a controversial idea when it appeared in the works of authors like 18th-century economist Adam Smith? It's because free markets proposed an economic system where the government did not regulate the economy, but left it to the people as consumers, producers, and sellers to set value through supply and demand. The government was to stay out of it. This idea was tied to John Locke's concept of individual liberty and the belief that the government should not be controlling people's lives. Okay, so why have a government at all?

Adam Smith saw the free market as an extension of the ideas of liberty. Free-market anarchists take this further to the elimination of government.

That's the question behind free-market anarchism, a catchall term for a range of economic philosophies that all believe that the key to true liberty is an unregulated market in a society without a government. Anarchists believe that society will structure itself naturally without a government, and free-market anarchists believe that this organic structure will come from free economic exchange. Through producing, buying, and selling, people will create order without the need for a government and therefore will live without sacrificing their rights to any political institutions. The result: you can have absolute liberty and still have social order.


Free-market anarchism is a broad term, so maybe we can narrow this down by examining a few of the philosophies often associated with it. In general, we can categorize these into two groups: those that see capitalism and anarchism as compatible, and those that do not.

Let's start with a philosophy that sees anarchism and capitalism as compatible. Anarcho-capitalism is a philosophy that argues for the elimination of government but maintenance of social order through the structures and institutions of capitalism. The basic idea is that all the negative consequences of capitalism, like classism and oppression of the workers, are faults of the government. In an anarchist society, people could express their individual liberties through pure capitalism and create a functioning society.

So, what would this actually look like? For one, all the duties we traditionally attribute to the state (like law enforcement and cleaning parks) would be privatized. Private companies would be in charge of all of this, monitored by privatized courts that operated on a system of contract law. Anarcho-capitalists also believe strongly in the importance of private property. People would own their possessions, and the market would be based on a voluntary exchange of services and private property. So, the basic tenets of capitalism are still in place: people own private property; value is determined by supply, demand, and exchange of goods/services; and consumers control the economy. The big difference is that this is entirely voluntary: there is no government regulation, and there is no state to tell you what to do with your private property, i.e. use it to pay taxes. The capitalist market takes care of all of that.


In a different camp, we find theorists who support anarchism, but think that capitalism is itself inherently flawed. One of the distinguishing differences in these opinions is that anti-capitalist free-market anarchists generally do not support the concept of private property. More frequently, they support socialist-inspired notions of classless and property-less societies. The dissolution of class is a big priority in these ideologies, and they often see private property as the building block of class.

Pierre Joseph Proudhon, the founder of mutualism

One of the major anti-capitalist branches of free-market anarchism is mutualism. Unlike more socialist doctrines, mutualism does not support state control of the means of production and distribution of wealth. Instead, mutualism envisions an unregulated free market in every person controls their own means of possession. This can be an individual concept, as in controlling your own labor, or through collective ownership of factories and industries. In this system, market exchange would be based on a sense of mutual return: a product should be exchanged for something equally useful, which required an equal amount of labor to produce. The free market is based on mutual exchange like this.

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