link to original reddit post by /u/GelComb
A lot of people draw comparisons with Halloween to socialism, because of the whole "free handouts" aspect of the holiday. That's a bad comparison because the handouts are completely voluntary. But that's not the point of this post.
As a young kid, every Halloween, myself and all of the cousins would go to my grandparents' subdivision and trick or treat. When the trick-or-treating ended, we would go back to the basement, and dump our bags on the floor and begin sorting our candy into piles.
Suddenly, an impromptu bazaar formed. It's quite curious indeed that without any prior knowledge of markets, capitalism, or trade, a spontaneous market was able to self-organize within a group of 9 year-olds and under. Undoubtedly, the desire to trade freely with other humans was a natural instinct.
Candy was exchanged from person to person. Everyone had their own personal preferences - I liked sour patch kids, one cousin liked pretzels. We would always make that trade. Everyone acted purely in self-interest, with no other motive than to fulfill the completely selfish goal of maximizing their hoard of candy they enjoy most.
I didn't recognize it at the time, but retroactively thinking about it, I witnessed complex market behavior! I saw auctions, when multiple kids had the same preference, and watched them bid the price up. There were de-facto "rates" that formed through price discovery, with every candy having a denomination in Tootsie Rolls one year. A Kit Kat was worth 6 Tootsie Rolls. I even saw (and participated in) arbitrage!
This souk of sweets usually lasted half an hour but sometimes went on longer depending on how many kids were there. And when the trading was over, everybody was more satisfied with the candy they had afterwards than what they had before. Sure, some kids didn't all get the deals they wanted, and some kids seemed to have "profited" more than others, but it was objective fact that every single child had improved their candy stash according to their own personal preference by the end of the trading session.
But one year, an aunt showed up who wasn't present on Halloween in the past. After trick-or-treating was finished, our annual market began, as was tradition. As an adult, she watched our trades, and she clearly thought it was very interesting to watch us work.
After a period of observation, she made a proclamation. You see, some of the trades were unfair. Or at least they were deemed unfair by the adult in the room. She claimed that some kids were taking advantage of other kids by giving them bad offers, and that the victims were too naïve to know for themselves what is a good deal and what isn't. Suddenly, every trade was monitored and judged for "fairness."
Over time, she began using this ability to intervene in more and more trades.
This had a chilling effect on the candy trade to say the least. Some kids were afraid of even offering a trade to another kid, because if that trade was deemed unfair, the arbitrator would "rectify" the trade in a way that may leave them in a worse position than they had started.
Trading came screeching to a halt. Kids began crying because they were stuck with candy that they didn't like, and nobody was willing to trade with them because it wasn't worth the risk of Auntie Arbitrator deciding the final terms of the trade. You see, even though she knew the kids very well, it was impossible for her to come up with a trade fairer than what the kids determined on their own, because she didn't have infinite knowledge of our personal preferences.
At this point, who is to blame? According to my aunt, it was the profiteers who were now hoarding "the best" candy and refusing trade. We were told we shouldn't have been trading candy in the first place, because look what you've done. Kids are crying, people don't have the candy they want. You see, we were told the older kids took advantage of the younger kids and caused this mess. But we never had this problem in years past, when we were left to trade on our own without adult intervention.
The night ended on an especially sour note when she determined the best way to sort out the situation was to redistribute candy according to what she deemed fair. I am sure it is unnecessary for me to write this next part: many, many children were not happy with the terms of the new redistribution.
And yet another deep fact was demonstrated the next Halloween, although I didn't realize it until recently. The same aunt was present, and everybody remembered what had happened last year. This year, our behavior was different, merely because of the threat of heavy regulation. We hid our best candy in our pockets rather than openly displaying them, to prevent them from being redistributed. You could say it was an early form of tax evasion.
The market began but much more cautiously this time. We traded, but the trade was muted and the majority of the most-liked candy was kept off the market. If it was traded, it would be upstairs, where a small "black market" formed where you could make a quick trade that was unseen by Ol' Auntie.
That year, she did not interfere with the market whatsoever. But her mere presence and history of interference lead to a massive behavioral change in all market participants, to our detriment. The trade that year was, in a way, self-censored. Certain offers that would have been made otherwise, were not made. As you can imagine, this lead to a butterfly effect with many negative outcomes. And everyone felt underwhelmed by the end of this trading session compared to prior years due to the lack of vibrant trade and "big hauls."
I didn't know it at the time, but Halloween taught me to love liberty and decry forceful interference long before I could ever crack open an economics book.