Markets don't exist with out rules and regulations

If I'm going to talk something called "Fair Market Theory", I want to start with at least some sort of discussion of what a market is. This is important, because of how often we hear calls that regulation will ruin some industry and lead to worse because it will damage the operation of the market.

A market is a place where goods and services are bought and sold. This basic definition has in it some implications that are crucial. What is it, after all, to buy and sell something? The market is a market only if people follow basic rules and regulations about how buying and selling work.

Crucial among these things--though sometimes overlooked by free-market proponents--is that what goes on in the market is actually buying and selling, not cheating, lying and stealing.

If people can seize goods by force, that's not a market.
If people can sell sawdust as flour, that's not a market.

This kind of regulation is crucial for a market to be a market. It's also a crucial, though unstated, presumption of basic explanations of why free markets are supposed to lead to good outcomes. Markets are supposed to lead to optimal social outcomes by supporting efficient use of resources and innovation. Free market theory doesn't claim that free markets are good because they allow people to get rich selling sawdust as food.

And we can see that free market theorists generally will not object to regulations in areas like truth in advertising laws (or will object less).

But if a market needs some regulation to achieve its optimal goal, how much regulation is enough and how much is too much? The question is not whether we can create a market without any regulation at all--without any regulation at all, there is no market, there is only the strong and ruthless preying on the weak and honest. A market only becomes a market when the buyers and sellers can believe that their goods and persons will be safe, and that generally they will receive money for what they sell, and they will receive the goods or services that they pay for.

There is no such thing as a market without regulation, and there can be no such thing as long as people are willing to cheat, lie, steal, and kill for their own gain.

Wouldn't it be great if people didn't cheat, lie, steal, and kill?
Wouldn't it be great if markets were set up to protect market participants from such threats? Wouldn't it be great if there were market regulations that made lying, cheating and killing into crimes?