If you admire the power of the free market to fuel growth and increase living standards for everyone, you should also be mindful of its destructive qualities. It’s true to say that capitalism’s element of creative destruction is the generator of progress. Old industries are sometimes devastated by mass technological advances. On a smaller scale, people lose their jobs daily because they can’t keep up with the competition.

One problem in free-market economies in practice, not theory, is nominal wage rigidity. What should happen with labour as it does with other products is that when there is a surplus of supply, the price decreases to increase demand. If there are more eggs to sell, the price will drop to ensure more people buy them. However, with more unemployed people, wages do not tend to fall.

Unfortunately, accepting this means accepting that the market does not “clear” as expected by the theory. Therefore, there are a lot of involuntarily unemployed people. Unemployment is a serious problem even when the government fiscally support people because they’re unhappy.

Free-market economists need to accept the reality and focus their efforts on addressing the pressing issue of involuntary unemployment. The priority should be to remove foolish government regulations that exacerbate the problem: minimum wages, licensing laws, zero-hours contract regulation, and mandated benefits. Tax cuts on employers would increase the aggregate demand for labour.

The same people who refuse to admit that nominal wage rigidity is a live issue are the proponents of the solutions. Once free-market economists stop fearing the implications of nominal wage rigidity, they’ll realise their ideology is needed to fix it.