Question: How does limited government help a free market?

The one principle that I believe wraps together all of the rest of the principles of a market economy is the concept of limited government. Adam Smith, author of The Wealth of Nations (Bantam Classics), wrote the following:

The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

Governments are by nature unable to quickly respond to a ever changing market. Government is unable to avoid inserting bias into the decision process, giving favor to one sector or another of the market, thus directly or indirectly suppressing other sectors. One should read The Road to Serfdom, Fiftieth Anniversary Edition; by F. A. Hayekin order to gain a fuller appreciation of the folly of government controlled economies.

(At the same time that government should be restrained from controlling the market there is a proper place for government and its courts in order to enforce contracts and to ensure a "level playing field," i.e. preventing monopolies and such.)

The two items in the Constitution that restricts the federal government most are Amendments IX and X, part of The Bill of Rights. They read:

Amendment IX: The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.
Amendment X: The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

To see other Gems about the Constitution go to: CACP.info