Free enterprise denotes the self-ownership of each person’s labor as a resource which he is free to allocate as he chooses. Sometimes it is conflated with the term free market, which refers to the practice of allowing markets to operate by the rules of supply and demand, unfettered by government influence. However, it is worth noting that free enterprise locates agency in the individual’s ability to use his labor and resources however he sees fit, which suggests self-determination, while the term free market locates agency in the market at large, which suggests some constraints on an individual’s ability to determine the value and possible uses of his own labor.
In a capitalist society, wealth and the means of production are privately owned. This system of private ownership allows businesses and individuals to operate free of outside intervention. Free enterprise is the practice of going into business for oneself within the framework of a capitalist economy. When individuals practice free enterprise they inevitably fall into competition with others for the attention and capital of those they are attempting to sell their services or product to. Competition in turn creates markets by the principles of supply and demand, which is the basic way value or the cost of a product or service is determined in a capitalist society. Theoretically, competitors will attempt to attract business by improving the quality and driving down the cost of their products in order to succeed in winning the business of those who consume their products. The principle of competition is one of the most basic reasons most advocates of free enterprise cite when they make the claim that capitalism is the most beneficial of all economic systems.
Critics of capitalism sometimes make the argument that intense, unregulated competition makes it hard for newcomers to break into the market since they cannot compete with others who have had more time to accumulate resources and build foundations. Others have pointed to the existence of monopolies, where competing businesses either merge or beat each other out of the market, and subsequently gain the ability to set artificial prices on their goods and services because they do not have to compete with others. The development of monopolies has led many governments to enact some regulation on the functioning of the free market via such interventions as anti-trust laws. These interventions, although limiting in the most fundamental way, are thought to actually promote free enterprise because they are designed to promote competition and protect new entrants into the market.