A buzz word (or phrase) is one that just sort of rings true. Upon hearing it, we have an automatic sense of knowing what it means. "Free market economy" is a case in point.

Perhaps we shouldn't be too hasty in that assumption. Though we may be prone to assuming such understanding, a surprising number of people when queried have a harder time than you might think providing a precise definition of the term.

And, of course, definition as a matter of course is fraught with uncertainty. As confident as any of us may feel about ours, nobody is obliged to share it.

Semantics or historical precedent, the resort of many, in reality solves little. Precedents are simply too abundant when sought by determined and clever partisans. There is no science of definition. It is an unfailingly subjective enterprise.

Hopefully acknowledging these limits to definition establishes the lack of delusion informing the effort undertaken, here. I'm well aware that my definition is neither incontestable nor objectively truth. Such unavoidable limits though do not thereby diminish it. Its virtue lies in its utility. It is a definition that facilitates an important distinction about the nature of the world.

It also enjoys the virtue of not being merely piecemeal or makeshift. It is principled, which recommends it as a tool of analytic precision. I can of course do nothing about those who fail or refuse to observe these benefits.

What is not in any way vague about these matters though is that in providing this definition, the terms of debate are set. Criticism of my attitude to - or conception of - a free market economy must address it as I define it. To substitute one's own definition at the locus of criticizing my claims about a free market economy is quite literally to miss the point.

With those caveats in mind, I offer my definition, building as it were, back-to-front. An economy is defined as the dimension of a society addressing the employment of resources: material, human or otherwise. Exactly how those resources are employed exceed the definition.

This brings us to the matters of markets. A market exists where actors engage in the exchange of such resources. (The meaning of "resources" is not restricted to "natural resources" - e.g., stuff dug out of the ground. Rather the term refers to anything that is useful. The term "goods" could be interchangeable with "resources.") Money is not assumed is this definition. Barter economies are no less market economies.

The non-essential role of money is not to be confused with the elective nature of prices in markets. Prices after all are not based on monetary units (even if expressed in them where money exists). They are rather expressions of the consensus on the comparable valuation of resources. When money does exist, it is only one more resource. Like all the others, its value is determined through supply-and-demand driven trade. (For more on this, see my article on the Meaning of Money at the Fiat Currency Review.)

Market economies then are economies wherein value is established through the relative supply of and demand for resources that arises in the process of trading them. If a given resource is widely available and/or very few people want it, it will be valued less: it would take relatively more of it for most people to trade something they valued higher (i.e., it would have a lower price), than another resource less available and/or more widely in demand. Though, demand is always subjective .

Up to now, then, we've defined a market economy. Defining a specifically free market economy requires a step further. For these purposes, we can regard "free" as interchangeable with "voluntary." A free market economy is characterized by an economy in which all actors are free to trade any resource with exchange partner willing to mutually engage in the transaction.

We've now established three separate phenomena: an economy, a market economy and a free market economy. Let's illustrate the distinctions with reference to the case of marijuana. Most jurisdictions of the world prohibit selling and buying (not to mention growing and consuming) of marijuana. Police forces exercise their monopoly of legitimized violence to suppress trade in this resource.

Nonetheless, such markets exist and often thrive. They frequently are the major source of income in the economies of many areas. For some regions the marijuana market is the difference between local economic hardship and relative prosperity.

Police violence (being physically abducted and caged, is violence, whether regarded as legitimate or not) does not seem able to suppress markets. It does, though, suppress free markets. Where strong demand persists, even in the face of the threat of violence, markets emerge and persist.

If demand is sufficient, suppression of a resource, even by violence, will not eliminate the market for it. Threats of police violence do diminish the number of buyers and sellers in that market. And, since "trafficking" or "dealing" or otherwise holding large quantities is usually dealt with more severely, selling in particular is very dangerous. Dealing with this danger incurs elevated business costs. Those costs, combined with the violence-induced supply reduction, result in prices higher than the market would otherwise provide.

It is in this way that government suppression of markets, constraining freedom to trade, raises prices. Such an effect, though, is universal; it is not restricted to demonized resources. In fact, all government tariffs, zoning, subsidies, bailouts, and most taxation and regulation, equally backed by the threat of violence, effectively - and usually intentionally - reduces freedom to trade.

Hence, the doors are thrown wide open to all manner of influence peddling, self dealing, rent seeking and regulatory capture as the politically well connected bend government's police powers to the service of their own economic interests. It is this kind of crony mercantilism that is the antithesis of a free market economy.