The free-market system of voluntary economic trades, or the market economy, has existed in different stages ever since human beings began trading with one another. Free markets emerged as a natural process of social coordination, not unlike language. No single intellectual invented voluntary exchange or private property rights; no government developed the concept or implemented the first use of money as a means of exchange. The history of the market economy is one of constant, unintentional (but not uninterrupted) progress rather than a series of discoveries.
Even without money, human beings engaged in trade with one another. Evidence of this stretches back far longer than written history can explain. Trade was barter-based initially, but economic participants eventually realized that a medium of exchange would help facilitate these beneficial transactions. This is because of a problem that economists call the double coincidence of wants – if you have a chicken and want rice, you need to find a rice-carrying chicken-wanter. The oldest medium of exchange was cattle, likely as far back as 9000 to 6000 B.C. It wasn't until 1000 B.C. that metallic coins were manufactured in China and became the first known example of a good that functioned only as money.
While there is evidence of banking systems in early Mesopotamia, the concept wouldn't emerge again until the 15th century in Europe. This did not occur without significant resistance; the church initially condemned usury. Slowly thereafter, merchants and wealthy explorers began to change the notions of business and entrepreneurship.
There are two pillars of the market economy: voluntary exchange and private property. It is possible for trade to occur without one or the other, but that wouldn't be a market economy – it would be a centralized one. Private property has existed long before written history, but important intellectual arguments in favor of a private system of ownership of the means of production would not be made until John Locke in the 17th and 18th centuries.
Most advances in free market practices have been met with resistance by central authority and existing cultural elites. The natural tendency toward specialization and division of labor ran counter to the caste system in feudal Europe and India. Mass production and factory work was challenged by politically connected guildsmen. Technological change was famously attacked by Luddites between 1811 and 1817. Karl Marx believed that the state should take away all private ownership of the means of production.
Central authority and government planning have stood as the primary challengers to the market economy throughout history. In contemporary language, this is often presented as socialism versus capitalism. While technical distinctions can be drawn between common interpretations of these words and their actual meanings, they represent the modern manifestations of an age-old conflict: privately run, voluntary markets against state control.
Nearly all modern economists agree that the market economy is more productive and operates more efficiently than centrally planned governments. Even so, there is still considerable debate as to the correct balance between freedom and government control in economic affairs.