Market economy is one of the economic models which is mainly applied in the West. There are definitely differences among the market economy model and the other economic models. It is thus important to discuss what a market economy model is highlighting its strenths and weaknesses.
Definitely an important matter Desalegn Abraha Gebrekidan ! This pandemic in particular has shown us the limits of the "free market competition" approach, for instance as some US government branch was hijacking the face-masks ordered for the German police in China, at the moment of loading an aircraft...
It has also shown the limit of one of the underlying limits of the market economics: the Adam Smith assumption that independent agents pursuing their own interests lead to optimality: egoism does not help in a pandemic... It leads to more people dying.
Now two angles can be followed (individual versus comon):
-what does competition bring (bottom up, freely competing agents, etc)?
-what does cooperation bring, and its limits?
-what is individual essentially? (as good or agent feature)
-what is common, or is best handled collectively (good categories, groups of agents)?
A free market economy is one where supply and demand regulate production and labor as opposed to the government. Most countries' economies contain elements of both free market and command economies
A market economy is an economic system in which the decisions regarding investment, production and distribution are guided by the price signals created by the forces of supply and demand.
The free market is an economic system based on supply and demand with little or no government control. ... Based on its political and legal rules, a country's free market economy may range between very large or entirely black market.
Is a market economy the same as a free market?
They both are involved in determining the price and production of goods and services. On one hand, capitalism is focused on the creation of wealth and ownership of capital and factors of production, whereas a free market system is focused on the exchange of wealth, or goods and services.
I would like to thank you all for answering to the question that I have forwarded and which reads as: What is a free market or market economy?
Best Regards
Desalegn Abraha
A totally free market or totally controlled market are somewhat abstract ideas about economic phenomena that never exist, except as theoretical extreme points in theoretical economics..
Dear Desalegn Abraha Gebrekidan and dear debaters, the question of what is a free market economy and what is a market economy and what are the differences between the market economy model and other economic models is fundamental from the point of view of the subject of the contemporary economic systems of the world. For many years I have been studying centrally planned economies in the so-called Eastern Bloc controlled by the Soviet Union. We discussed many times with colleagues from Central European countries about the issue of: what are the differences between command and market economies and why the market economy has an advantage and ultimately won in the greatest conflict after World War II, i.e. the Cold War between the Western and Eastern Soviet systems (1947-1989). ). First of all, as Adeyemi Oluwole rightly stated, we can distinguish free-market economies, market economies as a model (based on pure theory), and I will add non-market economies, i.e. with a politically introduced ban on market exchange. In the practice of our Western civilization, the pure market economy model has never been embodied, although at the beginning of the 20th century economists from the school of neoclassical economics very much wanted such a model to be politically reformulated, because it would give the supremacy of market competition forces and the best purchasing conditions for consumers . In fact, I believe, based on my many years of comparative studies of centrally planned and market economies, that entrepreneurs, politicians, hired workers and consumers - the four greatest forces in the economy have different interests and, as a result, a specific system mix is created. In the real economy, the interests of the most influential, resourceful and strong social groups clash and win. This means that most often we are dealing not with an economy based on purely market forces, but with a mixed economy, i.e. with government intervention in the market (implementation of the political interests of the ruling formation and its electorate), various forms of ownership in the economy, often with a large admixture of state property and cooperative society, different positions of trade unions, different degrees of monopoly of market structures and different scope of rights for consumers. Finally, market economies differ from each other in terms of business culture and the degree of openness to exchange with the world, i.e. openness to foreign trade, openness to foreign consumers and employees, and financial exchange. Even at the beginning of the 21st century, we taught at universities about the four main models of the market economy in the world: the Anglo-American economic model, the Rhenish market model, the Scandinavian economic model, and finally the East Asian collective system. These four seemed to us to be the most resilient and expressive in terms of their internal features. At present, I have doubts about this division, as I believe that the globalized world has led to a significant reevaluation of market systems. It is likely that completely new market systems will emerge after the covid 19 pandemic and we can expect new solutions for the global market economy. I am curious about your opinion. I cordially greet all the participants in this discussion thread.
Dear Georgi Kiranchev, Dariusz Tomasz Grala, Paul F. Gentle and Osamah K. Abdulretha Alshoreefi,
I would like to thank you all for putting an asnwer to the question of what a free market economy is and what is the difference among a market economy and a free market economy. I am really impressed by your answers and contributions.
Best Regards
Desalegn Abraha
Market economy is the system of economy based on market. Free market economy is an economic system that relies on market forces. This system avoids government intervention in the market
Dear Johnny Walker Situmorang,
Thank you very much for trying to teach us the difference among a market economy and free market economy. Please make it clear if there is a difference among a market economy and free market economy. I can see that you are trying to show a difference among a marekt economy and free market economy, however as it is not clear enough please clarify the difference if there is a difference at all.
Best Regards
Desalegn Abraja
Dear Georgi Kiranchev,
Thank you very much for the detailed explanation. Let me ask you again if you are trying to show us whether market economy and free marekt are the same or different. I will appreciate it very much if you can give us a direct answer.
Best Regards
Desalegn Abraha
Dear Dariusz Tomasz Grala,
Thank you for your detailed and clear answer on the question; What is a free market or market economy? I found your answer to be very pedagogoical, clear and interesting.
Best Regards
Desalegn Abraha
Dear Dariusz Tomasz Grala,
May I kindly ask you to send me your email.
Best Regards
Desalegn Abraha
Dear Georgi Kiranchev,
Thank you very much for the additonal explanation and clarification which is very important. PLease send me your email.
Best Regards
Desalegn Abraha
Dear Georgi Kiranchev,
Thank you very much for giving further explanation about the various economic models.
Best Regards
Desalegn Abraha
I would like to thank you all who are making significant and valuable explanations to the question of what a market economy is and what is the difference among market economy and free market.
Best Regards
Desalegn Abraha
A market economy is a better description of what we know in types of market structure. A free market economy amplifies the "free" aspect which may be an extreme example used in textbook to explain the freely determined prices which don't exist in the real world. No market economy is free in the sense that the Government don't intervene at all. A market economy has some degree of Government intervention. Prices are not freely determined as these can lead to manipulation and abuses.
Dear Chung Tin Fah,
Thank you for your commnets. If the case is like what you wrote what do you think if we called it a mixed economy instead of a free market economy if there is always some degree of Government intervention.
Best Regards
Desalegn Abraha
Desalegn Abraha Gebrekidan Agree with your views because a free market economy is a text-book example.
Dear Dr Chung Tin Fah,
Thank you very much for your positive comments.
Best Regards
Desalegn Abraha
Free market is the model of market no barriers to entry and out for actors. Meanwhile market economy could we say that country (economy) which is developing
Dear Doctor Johnny Walker Situmorang,
You answer is that a free market economy is the model of market no barriers to entry and out of actors. Moreover, you wrote that market economy could we say that country (economy) which is developing. I don't think that I can agree if I have understood you fully. Can we find a market without barriers? I don't think as each and every government adapts some sort of barriers that benefits its economy.MOreover, you wrote out of actors. What does that exactly mean? If there are no actors there is no functioning economy.For an economy to function there should exists different typew of actors that perform different types of duties.
You also define that a market economy could we say that country (economy) which is developing. What if it is already developed, what do you want to call it.
I hope that you will read my answer and come with a positive feedback.
Best Regards
Desalegn Abraha
The free market is a dynamic system focused on supply and demand, with little to no government influence over it. This is a concise overview of all mutual agreements in a specified economic setting. The free market is defined by a random and autonomous series of transactions by which individuals make economic choices.
The free market is a highly competitive market. Not much is fully complete, 100 percent. free markets, i.e. that fully meet all the assumptions and conditions of the model of market structures on which there is a full, perfect, 100 percent competition. Usually, it is not possible for all players, even in a highly competitive market, including demand- and supply-side actors, to have the same and complete information on all issues relating to a given market, including product and service offers, production technologies used, etc.
Regards,
Dariusz Prokopowicz
I will refer directly to the substance of the initial Question, which is: "It is thus important to discuss what a market economy model is, highlighting its strengths and weaknesses".
The mainstream (neoclassical) model of a market economy is a very logical theoretical model to study the basic way that economy works. Although it has been often criticized for its ideal assumptions (homogeneity of commodity, free market, free entry of firms, free movement of production factors, full knowledge and rationality by the economic agents), a basic theory always grounds on some ideal situation (even in physics) otherwise we cannot have a basic theory.
Why, then, do the conclusions of this theory have such a tremendous deviation from reality? The problem with mainstream economics lies not in the above assumptions and methodology, but in some fundamental mathematical mistakes in its analysis, the most serious being: the price taking principle (horizontal demand curve for the firm), and the wrong assumption for infinite number of tiny firms. The most obvious proof for these mistakes of mainstream economics is that the point of market equilibrium (intersection of total supply with total demand) does not maximize the profits of firms, as this occurs at the intersection of the total supply (marginal cost) with the total marginal revenue coming from the total demand (and not with the total demand itself). This is a fundamental mistake and inconsistency of neoclassical economics, as this latter sets profit maximization as its basic presupposition. The revision of these mistakes changes dramatically mainstream economics and its major conclusions about equilibrium at minimum cost, maximization of social welfare, level of employment, etc, with tremendous socio-political implications.
Article The Mathematical Mistakes of Neoclassical Theory and its Reformation
Article The Disproof of Neoclassical Theory by Means of Its Own Means