Problems internal to markets: inefficiency and market “failures” Defenders of free markets and capitalism as a social order do not primarily defend these institutions because they embody the moral principle of maximizing individual freedom, but rather because these institutions are also supposed to promote the general welfare. Many people may concede that markets may be unfair in some ways, that real freedom is limited for many people within capitalism, but still believe that maximally free marketsbased on private property are the surest route to efficiency and improvements in the general welfare.
It is certainly the case that markets are often pretty efficient and that private ownership of firms can often “deliver the goods”. But this is a seriously incomplete picture. There are many circumstances in which markets fail and important instances where they do a terrible job. Our ultimate conclusion will be that if one wants to realize to the greatest extent possible the values of efficiency, then the ideal should not be the free market of unregulated capitalism, but democratically accountable markets. In the case of Contemporary American Society this would require a dramatic revitalization of democracy and strengthening of the “affirmative state”.