Market economy
 | This article needs additional citations for verification. (November 2021) |
| Part of a series on |
| Economic systems |
|---|
|
Major types
|
|
| Part of a series on |
| Liberalism |
|---|
 |
A market economy is an
Market economies range from minimally regulated
State-directed or dirigist economies are those where the state plays a directive role in guiding the overall development of the market through industrial policies or indicative planning—which guides yet does not substitute the market for economic planning—a form sometimes referred to as a mixed economy.[4][5]
Market economies are contrasted with
Characteristics
Property rights
For market economies to function efficiently, governments must establish clearly defined and enforceable
Supply and demand
Market economies rely upon a price system to signal market actors to adjust production and investment. Price formation relies on the interaction of supply and demand to reach or approximate an equilibrium where unit price for a particular good or service is at a point where the quantity demanded equals the quantity supplied.
Governments can intervene by establishing
Capitalism
| Part of a series on |
| Capitalism |
|---|
Capitalism is an economic system where the
There are different variations of capitalism with different relationships to markets. In
Capitalism has been dominant in the Western world since the end of mercantilism. However, it is argued that the term mixed economies more precisely describes most contemporary economies due to their containing both private-owned and state-owned enterprises. In capitalism, prices determine the demand-supply scale. Higher demand for certain goods and services lead to higher prices and lower demand for certain goods lead to lower prices, in relation to supply.
Free-market capitalism
A capitalist free-market economy is an economic system where prices for goods and services are set freely by the forces of supply and demand and are expected by its supporters to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets, private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights and enforcing contracts.
Laissez-faire
Laissez-faire is synonymous with what was referred to as strict
Welfare capitalism
Welfare capitalism is a capitalist economy that includes public policies favoring extensive provisions for social welfare services. The economic mechanism involves a free market and the predominance of privately owned enterprises in the economy, but public provision of universal welfare services aimed at enhancing individual autonomy and maximizing equality. Examples of contemporary welfare capitalism include the Nordic model of capitalism predominant in Northern Europe.[13]
Regional models
Anglo-Saxon model
Anglo-Saxon capitalism is the form of capitalism predominant in Anglophone countries and typified by the economy of the United States. It is contrasted with European models of capitalism such as the continental social market model and the Nordic model. Anglo-Saxon capitalism refers to a macroeconomic policy regime and capital market structure common to the Anglophone economies. Among these characteristics are low rates of taxation, more open international markets, lower labor market protections and a less generous welfare state eschewing collective bargaining schemes found in the continental and northern European models of capitalism.[14]
East Asian model
The East Asian model of capitalism involves a strong role for state investment and in some instances involves state-owned enterprises. The state takes an active role in promoting economic development through subsidies, the facilitation of "national champions" and an export-based model of growth. The actual practice of this model varies by country. This designation has been applied to the economies of China, Japan, Singapore, South Korea, and Vietnam.
A related concept in political science is the developmental state.
Social market economy
The social market economy was implemented by
Socialism
Market socialism is a form of market economy where the means of production are socially owned. In a market socialist economy, firms operate according to the rules of supply and demand and operate to maximize profit; the principal difference between market socialism and capitalism being that the profits accrue to society as a whole as opposed to private owners.[17]
The distinguishing feature between non-market socialism and market socialism is the existence of a market for
Advocates of market socialism such as
Models of market socialism
Market socialism traces its roots to
In the 1930s, the economists
A more contemporary model of market socialism is that put forth by the American economist John Roemer, referred to as economic democracy. In this model, social ownership is achieved through public ownership of equity in a market economy. A Bureau of Public Ownership would own controlling shares in publicly listed firms, so that the profits generated would be used for public finance and the provision of a basic income.
Some
Self-managed market socialism was promoted in Yugoslavia by economists Branko Horvat and Jaroslav Vaněk. In the self-managed model of socialism, firms would be directly owned by their employees and the management board would be elected by employees. These cooperative firms would compete with each other in a market for both capital goods and for selling consumer goods.
Socialist market economy
Following the
In religion
A wide range of philosophers and theologians have linked market economies to concepts from monotheistic religions.
Christianity
In the Christian faith, the
Buddhism
The Buddhist approach to the market economy was dealt with in E. F. Schumacher’s 1966 essay "Buddhist Economics". Schumacher asserted that a market economy guided by Buddhist principles would more successfully meet the needs of its people. He emphasized the importance or pursuing occupations that adhered to Buddhist teachings. The essay would later become required reading for a course that Clair Brown offered at University of California, Berkeley.[23]
Criticism
The economist Joseph Stiglitz argues that markets suffer from informational inefficiency and the presumed efficiency of markets stems from the faulty assumptions of neoclassical welfare economics, particularly the assumption of perfect and costless information and related incentive problems. Neoclassical economics assumes static equilibrium and efficient markets require that there be no non-convexities, even though nonconvexities are pervasive in modern economies. Stiglitz's critique applies to both existing models of capitalism and to hypothetical models of market socialism. However, Stiglitz does not advocate replacing markets, but instead states that there is a significant role for government intervention to boost the efficiency of markets and to address the pervasive market failures that exist in contemporary economies.[24] A fair market economy is in fact a martingale or a Brownian motion model and for a participant competitor in such a model there is no more than 50% of success chances at any given moment. Due to the fractal nature of any fair market and being market participants subject to the law of competition which impose reinvesting an increasing part of profits, the mean statistical chance of bankruptcy within the half life of any participant is also 50%[25] and 100% whether an infinite sample of time is considered.
Without taking the argument that far, it is evident that in a market system with uneven distribution of empowering work, such as Economic Democracy, some workers will be more able than others to capture the benefits of economic gain. For example, if one worker designs cars and another builds them, the designer will use his cognitive skills more frequently than the builder. In the long term, the designer will become more adept at conceptual work than the builder, giving the former greater bargaining power in a firm over the distribution of income. A conceptual worker who is not satisfied with his income can threaten to work for a company that will pay him more. The effect is a class division between conceptual and manual laborers, and ultimately managers and workers, and a de facto labor market for conceptual workers.[26]
The role of supply and demand in a market economy
Supply and demand play an instrumental role in driving market economies by setting both prices and quantities traded in markets. Supply is defined as any increase in price leading to an increase in supply from producers; demand on the other hand means any drop leads to an increase in desired quantities from consumers; these two laws meet at equilibrium when provided quantity equals quantity demanded - known as equilibrium price/quantity equilibrium point.[28] Prices play an extremely vital role in market economies by providing important information about commodity and service availability. When there is strong demand but limited supply, prices increase, signaling to producers that there may be opportunities to increase profits by producing more of that product.[29] Conversely, when there is low demand with increased supply then prices reduce, showing manufacturers they must either reduce output or find methods of cutting costs in order to stay competitive and remain profitable.
External factors, including shifting technological standards, new government laws, and natural catastrophes can have a substantial impact on supply and demand. Technological innovations may increase supply, while laws issued by governments could decrease it or even demand. Natural disasters have the ability to severely disrupt supply chains, creating shortages of key items that increase costs while simultaneously decreasing demand. Supply and demand play an indispensable role in any market economy by ensuring prices reflect market forces accurately, adapting accordingly as conditions shift between supply and demand situations, while producers adjust production according to price signals from consumers, fulfilling customers' requests while giving individuals freedom in making purchasing choices based on personal preferences or financial constraints. Thus supply and demand play an instrumental part in shaping and stabilizing economies governed by market forces.
Sustainable market economy
A sustainable market economy seeks to balance economic expansion and environmental preservation.[30] It acknowledges that sustainable environmental protection and resource management are essential for long-term economic growth. To achieve this balance, implementing sustainable practices across sectors, such as lowering carbon emissions, developing renewable energy sources, and putting circular economy ideas into practice. Tax incentives, carbon trading programs, and environmental requirements are just a few ways government rules and policies encourage enterprises to adopt sustainable practices.
At the same time, consumer demand for eco-friendly goods and services and understanding of these issues may influence market dynamics to favour more sustainable options.[31] A sustainable market economy may encourage innovation, provide green employment, and guarantee the welfare of future generations by incorporating environmental factors into economic decision-making. Prioritizing sustainability while preserving economic development needs cooperation between governments, corporations, and people.
See also
- Economics portal
Law portal
Libertarianism portal
References
- ISBN 0618261818.
Market Economy: Economy in which fundamentals of supply and demand provide signals regarding resource utilization.
- ^ Altvater, E. (1993). The Future of the Market: An Essay on the Regulation of Money and Nature After the Collapse of "Actually Existing Socialism. Verso. p. 57.
- ^ Yu-Shan Wu (1995). Comparative Economic Transformations: Mainland China, Hungary, the Soviet Union, and Taiwan. Stanford University Press. p. 8.
In laissez-faire capitalism, the state restricts itself to providing public goods and services that the economy cannot generate by itself and to safeguarding private ownership and the smooth operation of the self-regulating market.
- ^ Altvater, E. (1993). The Future of the Market: An Essay on the Regulation of Money and Nature After the Collapse of "Actually Existing Socialism. Verso. pp. 237–238.
- ^ Tucker, Irvin B., Macroeconomics for Today. West Publishing. p. 491[ISBN missing]
- ^ Paul M. Johnson (2005). "A Glossary of Political Economy Terms, Market economy". Auburn University. Archived from the original on 27 December 2012. Retrieved 28 December 2012.
- ISBN 978-0804775663.[page needed]
- ^ Chartier, Gary; Johnson, Charles W. (2011). Markets Not Capitalism: Individualist Anarchism Against Bosses, Inequality, Corporate Power, and Structural Poverty. Brooklyn, NY: Minor Compositions/Autonomedia[page needed]
- ^ "It introduces an eye-opening approach to radical social thought, rooted equally in libertarian socialism and market anarchism." Chartier, Gary; Johnson, Charles W. (2011). Markets Not Capitalism: Individualist Anarchism Against Bosses, Inequality, Corporate Power, and Structural Poverty. Brooklyn, NY: Minor Compositions/Autonomedia. p. back cover.
- ^ "But there has always been a market-oriented strand of libertarian socialism that emphasizes voluntary cooperation between producers. And markets, properly understood, have always been about cooperation. As a commenter at Reason magazine's Hit&Run blog, remarking on Jesse Walker's link to the Kelly article, put it: "every trade is a cooperative act." In fact, it's a fairly common observation among market anarchists that genuinely free markets have the most legitimate claim to the label "socialism." "Socialism: A Perfectly Good Word Rehabilitated" Archived 2016-03-10 at the Wayback Machine by Kevin Carson at website of Center for a Stateless Society.
- ^ Nick Manley, "Brief Introduction To Left-Wing Laissez Faire Economic Theory: Part One" Archived 2021-08-18 at the Wayback Machine.
- ^ Nick Manley, "Brief Introduction To Left-Wing Laissez Faire Economic Theory: Part Two" Archived 2021-05-16 at the Wayback Machine.
- ^ "The surprising ingredients of Swedish success – free markets and social cohesion" (PDF). Institute of Economic Affairs. June 25, 2013. Archived (PDF) from the original on 2012-10-22. Retrieved January 15, 2014.
- ^ Anglo-Saxon capitalism, Business Dictionary on BusinessDictionary.com: http://www.businessdictionary.com/definition/Anglo-Saxon-capitalism.html Archived 2020-09-27 at the Wayback Machine
- ^ keyword "social market economy" = “Soziale Marktwirtschaft” Archived 2011-12-12 at the Wayback Machine Duden Wirtschaft von A bis Z. Grundlagenwissen für Schule und Studium, Beruf und Alltag. 2. Aufl. Mannheim: Bibliographisches Institut & F.A. Brockhaus 2004. Lizenzausgabe Bonn: Bundeszentrale für politische Bildung 2004.
- ^ Duden Wirtschaft von A bis Z. "Eintrag: keyword "social market economy" = Soziale Marktwirtschaft" Archived 2012-08-29 at the Wayback Machine.
- ISBN 0618261818. (p. 142): "It is an economic system that combines social ownership of capital with market allocation of capital...The state owns the means of production, and returns accrue to society at large."
- ^ Social Dividend versus Basic Income Guarantee in Market Socialism, by Marangos, John. 2004. International Journal of Political Economy, vol. 34, no. 3, Fall 2004.
- ^ "Cooperative Economics: An Interview with Jaroslav Vanek" Archived 2021-08-17 at the Wayback Machine. Interview by Albert Perkins. Retrieved March 17, 2011.
- ISBN 978-0860916062.
...by the 1820s, 'Smithian' apologists for industrial capitalism confronted 'Smithian' socialists in a vigorous, and often venomous, debate over political economy.
- ^ Lord Sacks, "Rediscovering Religious Values in the Market Economy" Archived 2017-12-20 at the Wayback Machine, HuffPost, February 11, 2012
- ^ "Liberation theology" Archived 2019-10-29 at the Wayback Machine, BBC, July 18, 2011
- ^ Kathleen Maclay, "Buddhist economics: oxymoron or idea whose time has come?" Archived 2020-04-13 at the Wayback Machine, Berkeley News, March 13, 2014
- ISBN 978-1579580919.
Stiglitz criticizes the first and second welfare theorems for being based on the assumptions of complete markets (including a full set of futures and risk markets) and perfect and costless information, which are simply not true. Incentives are dubious too. Thus, capitalist markets are also not efficient and there is some role for government intervention. The ability to decentralize using the price system requires that there be no nonconvexities, but nonconvexities are pervasive.
- PMID 20937903.
- ^ ZMag. Archived from the originalon 2009-04-02. Retrieved 2008-06-26.
- ISBN 978-0860916062.[page needed]
- from the original on 2020-06-23. Retrieved 2023-04-21.
- from the original on 2022-01-27. Retrieved 2023-04-21.
- ^ Tomassetti, Paolo (2018–2019). "Labor Law and Environmental Sustainability". Comparative Labor Law & Policy Journal. 40: 61.
- PMID 32932797.
Further reading
- Åslund, Anders. “The Rise of State Capitalism.” Russia’s Crony Capitalism: The Path from Market Economy to Kleptocracy, .
- Beckert, J. and Aspers, P. (2011). The Worth of Goods: Valuation and Pricing in the Economy. ISBN 9780191618680.)
{{cite book}}: CS1 maint: multiple names: authors list (link - from the original on 2023-01-09. Retrieved 2022-03-31.
- Boushey, Heather. “Market Structure.” Unbound: How Inequality Constricts Our Economy and What We Can Do about It, JSTOR j.ctv24trb7p.11.
- Chari, Anusha. “The International Market for Corporate Control.” Global Goliaths: Multinational Corporations in the 21st Century Economy, edited by C. FRITZ FOLEY et al., JSTOR 10.7864/j.ctv11hpt7b.7.
- Cochoy, Franck. “Another Discipline for the Market Economy: Marketing as a Performative Knowledge and Know-How for Capitalism.”
- Cordier, S., Pareschi, L. & Toscani, G. On a Kinetic Model for a Simple Market Economy.
- Corneo, Giacoma and Daniel Steuer. “Market Economy Plus Welfare State.” Is Capitalism Obsolete?: A Journey through Alternative Economic Systems, JSTOR j.ctv24w62sr.14.
- Cowen, T. (2009). In Praise of Commercial Culture. ISBN 978-0674029934.
- ISBN 978-0674973152.
- Cronin, James E. “Market Rules and the International Economy.” Global Rules: America, Britain and a Disordered World, JSTOR j.ctt1bhkp54.8.
- Cyndecka, Małgorzata Agnieszka. “The Applicability and Application of the Market Economy Investor Principle: Lessons Learnt from the Financial Crisis.” European State Aid Law Quarterly, vol. 16, no. 4, Lexxion Verlagsgesellschaft mbH, 2017, pp. 512–526, JSTOR stable/26694186.
- Doti, J. and Lee, D. (1991). The Market Economy: A Reader. Oxford University Press. ISBN 978-0195332582.)
{{cite book}}: CS1 maint: multiple names: authors list (link
- Ebner, Alexander. “Continuity and Change in Germany’s Social Market Economy: A Matter of Economic Style?” Contesting Deregulation: Debates, Practices and Developments in the West since the 1970s, edited by Knud Andresen and Stefan Müller, 1st ed., vol. 31, .
- Finn, Daniel k. “What Can Be Done about Market Injustice?” Consumer Ethics in a Global Economy: How Buying Here Causes Injustice There, .
- Hall, P.A. and Soskice, D. (2001). Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. ISBN 978-0191647703.)
{{cite book}}: CS1 maint: multiple names: authors list (link - Hirschfeld, Mary L. “Toward a Humane Economy: A Pragmatic Approach.” Aquinas and the Market: Toward a Humane Economy, JSTOR j.ctvsf1p3x.10.
- Isachsen, A.J. and Gylfason, T. and Hamilton, C. and Hamilton, P.E.I.I.E.S.C.B. and Isachsen, P.I.E.A.J. (1992). Understanding the Market Economy. LCCN lc92024790.)
{{cite book}}: CS1 maint: multiple names: authors list (link - Johansson, P.O. (1991). An Introduction to Modern Welfare Economics. LCCN 90020420.
- Kamien, M.I. and Schwartz, N.L. and Pencavel, J. (1982). Market Structure and Innovation. Cambridge Surveys of Economic Literature. )
- Kratz, Agatha, et al. Time's Up: China's Coming Battle for Market Economy Status. JSTOR resrep21581.
- Kunde, Meg. “Making the Free Market Moral: Ronald Reagan’s Covenantal Economy.” Rhetoric and Public Affairs, vol. 22, no. 2, .
- Lavigne, M. (1999). The Economics of Transition: From Socialist Economy to Market Economy. ]
- LCCN 91008865.[permanent dead link]
- Leshem, Dotan. “From Ecclesiastical to Market Economy.” The Origins of Neoliberalism: Modeling the Economy from Jesus to Foucault, JSTOR 10.7312/lesh17776.11.
- Lothian, Tamara. “The Democratized Market Economy in Latin America (and Elsewhere): An Exercise in Institutional Thinking Within Law and Political Economy.” Law and the Wealth of Nations: Finance, Prosperity, and Democracy, JSTOR 10.7312/loth17466.8.
- Lothian, Tamara. “The Democratized Market Economy.” Law and the Wealth of Nations: Finance, Prosperity, and Democracy, JSTOR 10.7312/loth17466.7.
- ISBN 978-0199241347.
- Malloy, R.P. (2000). Law and Market Economy: Reinterpreting the Values of Law and Economics. LCCN 00711747.
- McKinnie, M. (2021). Theatre in Market Economies. Theatre and Performance Theory. Cambridge University Press. LCCN 2020039520.
- LCCN 93021886.
- Mirowski, P. and Plehwe, D. (2015). The Road from Mont Pèlerin: The Making of the Neoliberal Thought Collective, With a New Preface. LCCN 2016303988.)
{{cite book}}: CS1 maint: multiple names: authors list (link - Mittermaier, Karl and Isabella Mittermaier. “Free-Market Dogmatism and Pragmatism.” In The Hand Behind the Invisible Hand: Dogmatic and Pragmatic Views on Free Markets and the State of Economic Theory, 1st ed., 23–26.
- doi:10.2307/2118367
- JSTOR 40752185
- Nee, V. and Opper, S. (2012). Capitalism from Below: Markets and Institutional Change in China. LCCN 2011042367.)
{{cite book}}: CS1 maint: multiple names: authors list (link
- ISSN 0048-7333.
- Ngo, Tak-Wing. “Asia and the Historicity of the Market Economy.” Verge: Studies in Global Asias, vol. 1, no. 1, .
- Pomeranz, Kenneth. “Market Economies in Europe and Asia.” The Great Divergence: China, Europe, and the Making of the Modern World Economy, NED-New edition, vol. 117, .
- Ramanna, K. (2015). Political Standards: Corporate Interest, Ideology, and Leadership in the Shaping of Accounting Rules for the Market Economy. LCCN 2015011503.
- Robin, Ron. “Castrophobia and the Free Market: The Wohlstetters’ Moral Economy.” The Cold World They Made: The Strategic Legacy of Roberta and Albert Wohlstetter, JSTOR j.ctv253f7gh.8.
- Rodgers, Daniel T. “Moralizing the Market Economy.” As a City on a Hill: The Story of America’s Most Famous Lay Sermon, .
- Root, H.L. (2020). Networking History: East vs. West in a Complex Systems Perspective. LCCN 2019033289.
- Rosser, J.B.; Rosser, M.V. (2004). Comparative Economics in a Transforming World Economy. The MIT Press. LCCN 2003059363. Archivedfrom the original on 2024-02-08. Retrieved 2022-03-11.
- Schebesta, Martin. Climate Change, Digitisation and Globalisation — Does the Social Market Economy Need Renewal? JSTOR resrep25282.
- Sedgwick, P.H. (1999). The Market Economy and Christian Ethics. New studies in Christian ethics. ISBN 978-1107112483. Archivedfrom the original on 2024-02-08. Retrieved 2022-03-11.
- Shapiro, C. and Varian, H.R. (1998). Information Rules: A Strategic Guide to the Network Economy. ISBN 978-1422154625. Archived from the original on 2024-02-08. Retrieved 2022-03-11.)
{{cite book}}: CS1 maint: multiple names: authors list (link - Skidelsky, R. (2018). Money and Government: The Past and Future of Economics. ISBN 978-0300244243. Archivedfrom the original on 2024-02-08. Retrieved 2022-03-11.
- LCCN lc93043188. Archivedfrom the original on 2024-02-08. Retrieved 2022-03-11.
- Sumner, S. (2021). The Money Illusion: Market Monetarism, the Great Recession, and the Future of Monetary Policy. LCCN 2020056573. Archivedfrom the original on 2024-02-08. Retrieved 2022-03-11.
- Sundararajan, Arun. “The Sharing Economy, Market Economies, and Gift Economies.” The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism, JSTOR j.ctt1c2cqh3.5.
- Tanzi, V. (2011). Government versus Markets: The Changing Economic Role of the State. ]
- Temin, Peter. “The Labor Market.” The Roman Market Economy, JSTOR j.ctt1r2g35.11.
- Tomlinson, Jim. “The Failures of Neoliberalism in Britain since the 1970s: The Limits on ‘Market Forces’ in a Deindustrialising Economy and a ‘New Speenhamland.’” The Neoliberal Age?: Britain since the 1970s, edited by Aled Davies et al., JSTOR j.ctv1smjwgq.12.
- Ulrich, P. and Fearns, J. (2010). Integrative Economic Ethics: Foundations of a Civilized Market Economy. Cambridge University Press. ISBN 978-0521172424. Archived from the original on 2024-02-08. Retrieved 2022-03-11.)
{{cite book}}: CS1 maint: multiple names: authors list (link - von Stackelberg, H. and Von, S.H. and Peacock, A.T. (1952). The Theory of the Market Economy. )
- Weiss, Hadas. “Capital’s Fidelity: Financialization in the German Social Market Economy.” Financialization: Relational Approaches, edited by Chris Hann and Don Kalb, 1st ed., vol. 6, .
- Widerquist, Karl and Grant S. McCall. “The Negative Freedom Argument for the Market Economy.” The Prehistory of Private Property: Implications for Modern Political Theory, JSTOR 10.3366/j.ctv1hm8h0j.9.
- Wolf, M. (2005). Why Globalization Works. ISBN 978-0300251739. Archivedfrom the original on 2024-02-08. Retrieved 2022-03-11.
- Yeazell, S.C. (2018). Lawsuits in a Market Economy: The Evolution of Civil Litigation. ISBN 978-0226546421. Archivedfrom the original on 2024-02-08. Retrieved 2022-03-11.
- Zakim, M. (2018). Accounting for Capitalism: The World the Clerk Made. LCCN 2017035753. Archivedfrom the original on 2024-02-08. Retrieved 2022-03-11.
External links
Media related to Market economy at Wikimedia Commons- Market Systems at Encyclopædia Britannica Online.
