Voluntary exchange is not a moral system. A free market doesn't have morals.
http://en.wikipedia.org/wiki/The_Theory_of_Moral_Sentiments
in 1759, pondering the issue of why people behave morally when they could simply guard their own self-interest. As Smith pondered the issue more, he wrote An Inquiry into the Nature and Causes of the Wealth of Nations
http://en.wikipedia.org/wiki/The_Wealth_of_Nations
in which he discussed how free-market trade provides incentives to moral behavior. EVERYONE who is well educated should recognize this quotation:
"But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages."
In other words, society can be structured so that people will help you or other people who need help while looking out for number 1.
Hayek
http://en.wikipedia.org/wiki/Friedrich_von_Hayek
is good author on contrasting economic systems, showing how they can be actively immoral.
The choice here is not between different economic systems, but between different moral systems.
You cannot make a free market your moral system because markets are amoral. That is, it is not that they are not immoral and so should be replaced with something else; rather, they have no moral content - morality comes from somewhere else.
You can pay someone to punch a third party in the nose. You get the value of knowing that someone is going to get hurt. The other guy gets your money. The transaction, in the free market, by itself has no moral content, though. A free market just means exchanging value for mutual gain. It doesn't say that those values have positive or negative moral worth.
Capitalism believes in a government which protects private property and human life with physical force. You can pay someone to punch someone else, but that's inconsistent with capitalistic philosophy.
What, in a free market moral system, prevents slavery? The justification must come from the free market, if free market is to be the moral system.
How can there exist a free market without the guarantee of the protection of private property? Without that you have anarchy (whoever is physically strongest wins).
I've never heard of someone invoking the idea of a "free market" without implying that the agents of the market are protected from physical harm.
This is by no means 'official' but from the first sentence of the article http://en.wikipedia.org/wiki/Free_market:
"A free market is a market without economic intervention and regulation by government except to outlaw and prosecute force or fraud."
When people say "free market" this is what they imply.
What, in a free market moral system, prevents slavery?
The government.
See "anarcho-capitalism": http://en.wikipedia.org/wiki/Anarcho-capitalism
In an anarcho-capitalist society, law enforcement, courts, and all other security services would be provided by voluntarily-funded competitors such as private defense agencies rather than through taxation, and money would be privately and competitively provided in an open market.
You continue...
> > What, in a free market moral system, prevents slavery?
> The government.
No. Slavery is prevented because the income generated by those would-be slaves is less than the income generated when those people fill the role of "consumer".
Also, if there are non-consensual exchanges, then by definition it is not a free market, but that simply avoids the question...
That said: the government does make an effort to prevent it, which I'm not sure can be said for the free market.
On the whole, both regulation and the free market are able to deal with most of slavery. But at the margin, it becomes cost-ineffective to mop up the very last instance. In both cases, the instance is low enough that most of us will never come face-to-face with slavery. But ferreting out one more evil person costs society more than it would benefit.
The thing that scares me about a truly free market without regulation are issues of coercion. Force may be eliminated, but there are so many other ways to take advantage of compromised people. Drug addicts, homeless, desperate parents, etc. Also, for a truly free market to work, you need enough information on both sides for people to make educated choices, but either side would prefer he have the information advantage.
Basically, I just don't see it working any better than the current system, but perhaps it would.
He didn't miss your point. He saw your point, and thinks it's wrong.
His policy proposals on that latter point are pretty pragmatic, and he endorses regulation when he thinks it has relatively large gains for relatively small downsides. For example, he proposes that the government ought to require employers to pay their employees in hard money, and not permit them to pay in promissory notes or in goods. His reasoning is that this prevents unscrupulous employers from tricking employees, either by paying them in goods whose value has been misrepresented, or by convincing them to work for promises of payment that the employer doesn't really intend to keep.
Are you really claiming we dont need "coercion or force" from regulators like the SEC or FTC?
It is naive to think any one human agents or regulatory agency is able to prevent those "complex unregulated derivatives" or not be corrupted by unethical firms/special interests/etc.
The free market system already have a "fail-safe" or "regulatory" function through the bankruptcy of entrepreneurs and rewarding prudent entrepreneurs with the leftover possessions of the bankrupt one. Failure is at the heart of the free market enterprise system. It is a feature, not a bug.
It is those who wishes to prevent these failures at all and any costs that keep our society stagnated or hurling down to its destruction as they keep funding economic activities that is out of reality with human needs and desire.
You can hire someone to murder someone else. Nothing wrong with that transaction in a free market. Similarly, you can be a credit card processor for child pornography - you take your cut, but since you don't do the deed, it's not your problem.
Do you see the problem?
(Hint: morality isn't emerging here. It comes from somewhere else.)
And I have no idea why you mentioned some "other economic system". I didn't. Why? Because I wasn't contrasting economic systems. I was contrasting moral systems.
Secondly, your view of free markets is naive. Lack of transparency and the problem of monopolies are only a few of the many problems that completely free markets suffer from. We have an FTC, because markets need to be regulated. Leaving them completely free leads to morally unacceptable results.
But some moral systems are consequentialistic [1] and for its proponents, the means are justified by the ends. A free market could be seen as a means to reach the moral end. Thus, they are often mixed up.
I wasn't trying to say that I thought free markets were immoral, or that they were not moral. (And so we should find a different economic system, or something).
I was trying to say that you cannot replace your personal morality, your moral system, with a free market (whatever that even means). That is, I was trying to say that markets were amoral, without moral content.