There are four main types of economic systems in the world: Traditional, command, market, and mixed. Each one of these offers its own unique set of pros and cons, sub-economies and tendencies, and plenty more.
Earlier, I took a look at traditional economics, but here I’ll be discussing yet another: market economics.
A market economy is very similar to a free market. The government doesn’t control any vital resources, valuable goods, or any other major economic segment. Rather, the economy is run by organizations run by the people.
Ultimately, there’s no such thing as a truly free market economy. Let’s take a look at America: while it’s a capitalist nation, our government still regulates (or, in many instances, attempts to) things such as fair trade, monopolies, government programs, and moral businesses.
You have an explosive company that is not only relatively safe, but also very well-controlled. This is in contrast to socialism, in which the government controls and owns the most profitable and vital industries, yet allows the rest of the market to operate freely.
However, the arguably biggest advantage to a market economy outside of economic benefits is the separation of the market and the government. This helps prevent the government from becoming too powerful, controlling, and similar to the governments of the world that oppress and exploit their people. Take a look at America, where a separation of market and state has played a large part in our economic success.
The main disadvantage of a market economy is a noted disparity in wealth and mobility. Since wealth tends to generate more wealth, it’s very easy for the rich in a market economy to get richer while the poor get poorer. And with no government regulations in place, the situation is hard to remedy.
Often, government regulations get in the way of profit for large businesses. While a lack of profit is hardly ideal, many of these regulations are set in the first place for a reason. For example, health and safety regulations are meant to improve working conditions, while other government regulations are set to minimize environmental damage.