In my book The Myth of the Free Market I explore the thoughts of Adam Smith (1723-1790), the intellectual Godfather of free market economics. It's clear Adam Smith believed people should be free to make their way in life, which meant they should be free of stifling feudal practices that maintained royal privileges and unearned life positions held by court sycophants.
In order to achieve these freedoms Smith argued the feudal state - with all of its stifling customs and traditions - should stay out of the marketplace.
While Adam Smith argued the state should stay out of the marketplace, he did not say market players should be free to do what they wanted. Rather, Smith argued the state should stay out of the market because of how it reinforced the stifling habits of feudalism (which undercut initiative), and because how it had historically - from Rome through 17th century Britain - intervened on behalf of those with power and privilege (which rewarded access).
What really irked Adam Smith was how the state intervened on behalf of those who already had wealth and power.
To prevent the state from rewarding privilege Smith argued the government should not intervene in the market place. Just as significantly, Smith also argued that if the state did intervene it should be done only to maintain a level playing field, or what he called the "laws of justice."
In simpler terms, providing subsidies and protection, or giving privileged market players a green light to do as they please, was not what Adam Smith was proposing. The real goal behind laissez-faire economics is to create a level playing field while preventing privilege from being unduly rewarded.
This simple message is lost on modern free market proponents.
But wait, there's more.
Most free marketeers don't understand any of this because - to be blunt - they are historical and constitutional illiterates.
Their ignorance of history is what compels them to conflate or draw false equivalencies between the state Adam Smith described in the 18th century, and the modern liberal state we live in today.
So, yeah, the idea that the state should stay out of the marketplace and let market players do what they want is a myth. And it's perpetuated by - surprise, surprise - people and market players who benefit financially from no oversight or few regulations.
I bring all of this up because former Labor Secretary Robert Reich provides us with three additional market myths in the modern world. Because we buy into these myths we allow policies to be created that help stifle the prospects of the middle class which, in turn, perpetuates and widens the gaps between those at the top of our financial food chain and the rest of us.