The following excerpt is from The Philosopher's Zone:http://www.abc.net.au/rn/philosopher...07/1923237.htm
Alan Saunders: John, let's turn to the modern case for the free market, and this turns on an intellectual construct called the ideal market. What is that, and why is it ideal?
John Wright: Well, it's a rather complex notion, but it's composed of a number of different elements. Roughly the idea is that in an ideal market all producers are competing against each other, they're trying to produce the best quality products as efficiently as possible, and in an ideal market there are no obstacles to them doing this, or nothing preventing this process of companies finding the best, the most efficient way of producing goods that the public wants. So that for example, in an ideal market, there would be no monopolies. If you've got a monopoly, that is, just one company producing all the goods of a particular type, say televisions or something like that, and there's no competition, then if there's no competition there's sort of not really that much stopping the company from offering the televisions for sale at a higher price. And so if you want to maximise the overall benefits to the community, that is getting high quality televisions at a lower cost, then there'll need to be no monopolies.
Some other aspects of the ideal market is that there are no public goods. Now what does that mean? Well, the notion of a public good is a fairly complex notion but it contains two components. One component is the idea of it being, in the terminology of economists, non-excludable. Well what does that mean? Well it means that something is non-excludable if you can't stop a person gaining the benefit from it. Now an example of this would be a lighthouse. Suppose there's a lighthouse up on a cliff somewhere, and it's shining out, telling boats there's rocks around here so stay away, there's no way you can stop a passing ship from seeing the lighthouse. This means it would be very difficult for example, for a private company to make a profit building lighthouses and offering the service for sale, because anybody can see the light whether they've paid the fee or not.
Now goods that have this feature that you can't stop a person from gaining the benefit of them, are called non-excludable.
There's also another feature: public goods are non-rival. Now what does that mean? Well, suppose I go into a canteen or something at lunchtime and there's only one hamburger left, and there's two people in the shop, me and someone else. Only one of us can have the hamburger. If I buy the hamburger and eat it, that stops the other person from eating that same hamburger. A hamburger is a rival good. One person's consuming it does stop another person from consuming it, but a lighthouse is not like that. Lighthouses are an example of a non-rival good. So are things like for example works of art, one person looking at a painting doesn't stop another person from looking at a painting.
There is also an interesting session on the illusion of choice (which is a by-product of competition):http://www.abc.net.au/rn/philosopher...10/2991617.htm