The free market, it will be shown, is an especially efficient information-generating mechanism. Whereas under other systems decision-makers are often insulated from the effects of their decisions, the free market provides both producers and consumers with direct, reality-oriented feedback and with a flexible environment in which they can constantly adjust their plans in accordance with new discoveries. Let us first examine the role of information in consumer choice.

In the free market, no single authority has responsibility for deciding which products are best for consumers. In the last analysis, each consumer is his or her own authority with regard to his or her purchasing decisions. As a consequence, the free market is not tied to a single scale of values; rather, it can respect the diverse value scales of many individuals with different subjective values and different objective needs and circumstances.

Consumers acquire useful feedback and improve their decisions in the marketplace, not only from their own positive and negative experiences, but also from observing the experiences of others and sharing information with each other. To the extent that they desire more formal mechanisms for obtaining outside evaluation, a market demand is created for reliable sources of consumer information.

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