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The rule of law

The rule of law is important to a free-market system. It prevents thieves and other criminals from taking away people’s economic freedom by taking their property through fraud, deceit, or force. A free-market system must have laws to prevent crime. No one who defends a free- market system believes that the word free means that there should be anarchy. In fact, some laws are necessary to protect the idea of a free market, because the idea of free, voluntary exchanges is violated when people steal from, cheat, or deceive others, or when people do not have the information they need to make informed decisions. (We explain the rule of law more fully in chapter 7, 225-26; see also 154-55.)

Therefore, a proper understanding of a free market includes laws against theft, fraud, the violation of contracts, and the sale of defective and dangerous products. A country can have such laws and remain a free-market system because the decisions about what to produce and consume are left to individual people, not the government.

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