A free market is a market in which prices of goods and services are arranged completely by the mutual consent of sellers and buyers. By definition, in a free market environment buyers and sellers do not coerce or mislead each other nor are they coerced by a third party. In the aggregate, the effect of these decisions en masse is described by the natural law of supply and demand. Free markets contrast sharply with controlled markets, in which governments directly or indirectly regulate prices or supplies, distorting market signals. In the marketplace the price of a good or service helps to quantify its value to consumers and thus balance it against other goods and services. In a free market, this relationship between price and value is more clear than in a controlled market. Through competition between vendors for the provision of products and services, prices tend to decrease, and quality tends to increase.
Free market economics is closely associated with laissez-faire economic philosophy, which expands this environment by confining government intervention to market failures. Hence, with government force limited to a defensive role, government itself does not initiate force in the marketplace beyond levying taxes in order to fund the maintenance of the free marketplace. Some free market advocates oppose taxation as well, claiming that the market is better at providing all valuable services of which defense and law are no exception, and that such services can be provided without direct taxation. Anarcho-capitalists, for example, would substitute arbitration agencies and private defense agencies.
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