Market economyFrom Wikipedia, the free encyclopediaPart of a series onEconomic systemsBy ideology [show]By coordination[show]By regional model[show]Sectors[show]Transition[show]Coordination[show]Other types[show]Business and economics portal V T E A market economy is an economy in which decisions regarding investment, production, and distribution are based onsupply and demand,[1] and prices of goods and services are determinedin a free price system.[] !he ma"or defining characteristic of a market economy is that investment decisions and the allocation of producer goods are mainly made by negotiation through markets.[#] !his is contrasted with a planned economy, where investment and production decisions are embodied in a plan of production.$arket economies can range from hypothetical laisse%&faire and free market variants to regulated markets andinterventionist variants. 'n reality, market economies do not e(ist in pure form, since societies and governments regulate them to varying degrees.[)][*] +ifferent perspectives e(ist as to how strong a role the government should have in both guiding the market economy and addressing the ine,ualities the market produces. $ost e(isting market economies include a degree of economic planning or state&directed activity, and are thus classified as mi(ed economies. !he term free-market economy is sometimes used synonymously with market economy, but it may also refer to laisse%&faire or free&market anarchism.[-]$arket economies do not logically presuppose the e(istence of private property in the means of production. A market economy can consist of various types of cooperatives, collectives or autonomous state agencies that ac,uire and e(change capital goods in capital markets, utili%ing a free price system to allocate capital goods and labor.[#] !here are many variations of market socialism, some of which involve employee&owned enterprises based on self&management. as well as models that involve public ownership of the means of production where capital goods are allocated through markets.[/]Contents[hide] 10apitalismo 1.11aisse%&faireo 1.Free&market economyo 1.#Welfare capitalismo 1.)2egional models 1.).1Anglo&3a(on model 1.).4ast Asian model 1.).#3ocial market economy $arket socialismo .15ublic ownership modelso .0ooperative socialismo .#3ocialist market economy #4arly market economies )0riticisms *3ee also -2eferencesCapitalism[edit]Main article: CapitalismPart of a series onCapitalismConcepts[show]Economic systems[show]Economic theories[show]Origins[show]Development[show]People[show]Related topics[hide] Anti-capitalism Black capitalism Capitalist state Consumerism Corporatism Crisis theory Criticism of capitalism Cronyism Culture of capitalism Exploitation lo!ali"ation #istory #istory of theory Market economy Periodi"ations of capitalism Perspecti$es on capitalism Post-capitalism %peculation %pontaneous order Venture philanthropyIdeologies[show] Capitalism portal Economics portal Philosophy portal Politics portal V T E 0apitalism generally refers to economic system where the means of production are largely or entirely privately owned and operated for a profit, structured on the process of capital accumulation. 'n general, in capitalist systems investment, distribution, income, and prices are determined by markets, whether regulated or unregulated.!here are different variations of capitalism with different relationships to markets. 'n 1aisse%&faire and free marketvariations of capitalism, markets are utili%ed most e(tensively with minimal or no state intervention and regulation over prices and the supply of goods and services. 'n interventionist, welfare capitalism and mi(ed economies, markets continue to play a dominant rolebut are regulated to some e(tent by government in order to correct market failures or to promote social welfare. 'n state capitalist systems, markets are relied upon the least, with the state relying heavily on either indirect economic planning and6or state&owned enterprises to accumulate capital.0apitalism has been dominant in the Western world since the end of feudalism, but most feel[who?] thatthe term 7mi(ed economies7 more precisely describes most contemporary economies, due to their containing both private&owned and state&owned enterprises. 'n capitalism, prices determine the demand&supply scale. For e(ample, higher demand for certain goods and services lead to higher prices and lower demand for certain goods lead to lower prices.Laissez-faire[edit]Main articles: Laissez-faire and Economic liberalism1aisse%&faire is synonymous with what was referred to as strict capitalist free market economy during the early and mid&18th century[citation needed] as a classical liberal 9right&libertarian: ideal to achieve. 't is generally understood that the necessary components for the functioning of an ideali%ed free market include the complete absence of government regulation, subsidies, artificial price pressures, and government&granted monopolies 9usually classified as coercive monopoly by free market advocates: and no ta(es or tariffs other than what is necessary for the government to provide protection from coercion and theft, maintaining peace and property rights, and providing for basic public goods. 2ight&libertarian advocates of anarcho&capitalism see the state as morally illegitimate and economically unnecessary and destructive.Free-market economy[edit]See also: Free marketFree&market economy refers to a capitalist economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of e,uilibrium without intervention by government policy. 't typically entails support for highly competitive markets, private ownership of productive enterprises. Laissez-faire is a more e(tensive form of free&market economy where the role of the state is limited to protecting property rights.Welfare capitalism[edit]Main article: Welfare capitalismWelfare capitalism refers to a capitalist economy that includes a public policies favoring e(tensive provisions for social welfare services. !he 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 ma(imi%ing e,uality. 4(amples of contemporary welfare capitalism include the ;ordic model of capitalism predominant in ;orthern 4urope.[oseph 5roudhon and was called 7mutualism7.3elf&managed market socialism was promoted in Fugoslavia by economists Eranko Gorvat and >aroslav Hanek. 'n the self&managed model of socialism, firms would be directly owned by their employees and the management board would be elected by employees. !hese cooperative firms would compete with each other in a market for both capital goods and for selling consumer goods.ocialist market economy[edit]Following the 18/< reforms, the 5eople@s 2epublic of 0hina instituted what it calls a 7socialist marketeconomy7, in which most of the economy is under state ownership, but the state enterprises are organi%ed as "oint&stock companies where various government agencies own controlling shares through a shareholder system. 5rices are set by a largely free&price system and the state&owned enterprises are not sub"ected to micromanagement by a government planning agency. A similar system called 7socialist&oriented market economy7 has emerged in Hietnam following the IJi $Ki reforms in 18oseph 3tiglit% 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. ;eoclassical economics assumes static e,uilibrium, and efficient markets re,uire that there be no non&conve(ities, even though nonconve(ities are pervasive in modern economies. 3tiglit%@s criti,ue applies to both e(isting models of capitalism and to hypothetical models of market socialism. Gowever, 3tiglit% does not advocate replacing markets, but states that there is a significant role for government intervention to boost the efficiency of markets and to address the pervasive market failures that e(ist in contemporary economies.[1)]2obin Gahnel and $ichael Albert claim that 7markets inherently produce class division.7[1*] Albert states that even if everyone started out with a balanced "ob comple( 9doing a mi( of roles of varying creativity, responsibility and empowerment: in a market economy, class divisions would arise.79...: Without taking the argument that far, it is evident that in a market system with uneven distribution of empowering work, such as 4conomic +emocracy, some workers will be more able than others to capture the benefits of economic gain. For e(ample, if one worker designs cars and another builds them, the designer will use his cognitive skills more fre,uently than the builder. 'n 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 isnot satisfied with his income can threaten to work for a company that will pay him more. !he effect isa class division between conceptual and manual laborers, and ultimately managers and workers, and a de facto labor market for conceptual workers 9...:7.[1*]+avid $c;ally argues that the logic of the market inherently produces ine,uitable outcomes and leads to une,ual e(changes, arguing that Adam 3mith@s moral intent and moral philosophy espousing e,ual e(change was undermined by the practice of the free markets he championed. !hedevelopment of the market economy involved coercion, e(ploitation and violence that Adam 3mith@s moral philosophy could not countenance. $c;ally also critici%es market socialists for believing in thepossibility of 7fair7 markets based on e,ual e(changes to be achieved by purging 7parasitical7 elements from the market economy, such as private ownership of the means of production. $c;ally argues that market socialism is an o(ymoron when socialism is defined as an end to wage&based labor.[1-]See also[edit] 4conomic freedom 4conomic liberalism Free market Brey market $arket socialism $arket structure $i(ed economy ;eoclassical economics 5lanned economy 5rice system 2egulated market 3ocial market economy 3ocialist market economyReferences[edit]1. !ump up " Bregory and 3tuart, 5aul and 2obert 9DD):. Comparin! Economic Systems in the$wenty-First Cent%ry& Se'enth Edition. Beorge Goffman. p. *#ohanna 9D11:. Markets in the name of Socialism: $he Left-Win! ori!ins of #eoliberalism. 3tanford =niversity 5ress. '3E; 8/anuary 1, DD1:. (eader0s /%ide to the Social Sciences. 2outledge. p. 1D1. '3E; 8/