This paper addresses and retorts those five criticisms and one suggestion by the Korean critics on capitalism and free market, that are raised after the Global Financial Crisis of 2008. In examining and analyzing them, we draw our logic and inspiration mainly from Austrian economists, especially Ludwig von Mises, Friedrich Hayek, and Murry Rothbard. We have found, in sum, that their attacks on free market is not logically well founded, and that their suggestion for policy-regime change will not solve but aggravate those social problems, the cause of which the critics allegedly attribute mainly to the libertarian ideas.
 

According to the critics, so called “irrational exuberance” of financial market has been ignited by the libertarian ideas of the deregulation of financial market, including allowing risky derivatives and privatization of banks. Their typical example is a sudden rise and radical fall of an Iceland economy. By examining the example of an Iceland, we found that both extreme maturity mismatch and currency mismatch pursued by the banks has been the pivotal cause for a radical rise and fall of an Icelandic economy. This risky and aggressive strategy of Icelandic banks has nothing to do with the privatization of banks. Owner of the banks will try maximize profit. but he also want to minimize loss. The reason why the strategy of high-risk and high return will be advisable only when interventionist central banking system support such strategy.

Labor-market flexibility is one of the areas most frequently attacked by the critics of market. on this issue, we explained why the need for reallocation of labor is especially great in the period of depression. The more smoothly such need will be satisfied the more flexible the labor-flexibility is allowed both in terms of wage and other regulations.

Dissatisfaction with the public education in Korea is well appreciated. one of them is what is called “"university entrance-exam hell”", that is, cut-throat competition among student to get permitted to the first-class Universities in Korea. This phenomenon is not caused by free market but by the intentional suppression of high-school entrance exam by the Korean government. By such policy, desire for better high-school and disappointment process has been substituted and intensified by desire for better University. In order to make schools more serviceable to the wishes of Parents rather than those of educational bureaucracy, we emphasized the need for a Voucher system as a way-station toward free education.

once third party-payment problem pervades the Medical service market, it distorts price signals and brings about wastes and high costs. What has happened to the medical insurance market in the United States was the result by that problem. We analyzed this process in the United States and showed why it is dangerous to socialize medical service by showing the case of dumping patients in both communist Soviet and the United States.

We also addressed the argument that market disintegrates the bondage of the community. Such argument presumes that by intervening the market we may restore the relationship between individuals within the community. Market system of division of labor and exchange, it is sure, is not compatible with self-sufficient community. However, restoring such community implies we have to make a radical decrease, by whatever means, in the current population, which can be supported only within the division of labor and high productivity. Relationship among members of such communities as family, voluntary mutual aid, and so on, (communities compatible with the current market system) will be more intimate when they feel mutual responsibility. But Welfare State or Nanny State tends to drive out such responsibility, contrary to the critics of the market.

Finally we addressed the suggestion by the critics of the market to replace a market solution into a political solution. We pointed out that this political solution will suffer from two vital problems, that is, the problem of economic calculation and the problem of social conflict. The first problem refers to the problem that arises when prices lose their true signal function as they do not emerge through market process. The problem of social conflict, which political solution invites, refers to the struggle among people to use the common tax-fund according to their different cherished values and economic interests.