What is the meaning of Market economy? Concept, Definition of Market economy

Concepts and meaning of market economy

Meaning of market economy

Market economy means the Organization and allocation of production and consumption of goods and services arising from the game between supply and demand in a situation of imperfect competition, which requires a certain participation of the State to correct and/or improve the negative effects of market failures and externalities and to ensure a minimum overall access to certain goods and services, and so on.
The term is equivalent to the free market. It is necessary to note, however, that there is no consensus, especially at the general, or theoretical level about which would be the balance of permissible State intervention unless a market economy becomes directed economy: "but there are certain aspects of the market economy which remain controversial. First, there is some controversy around which activities should be left in the hands of the State and what can be awarded to private initiative."
Consequently the market economy is understood generally as the version of the economy mixed, closest to the economic model of "free market" economy, which has led some to talk of mixed market economy.
Generally considered the example of most successful market economy is located in the United States. UU. in the period that goes from the end of the second world war to, at least, late 20th century. In the first part of that period the economic policies (see political economy) of that country was strongly influenced by the so-called clasico-keynesiana synthesis or neoclassical synthesis and, subsequently, by approximations of monetarism and the so-called Chicago School of economics.
Origin and general meaning of the term
The term became popular in the USA in the context of the cold war, being used, vaguely, to designate the economic systems of those countries which, at least theoretically, assigned an important role to private property and the free market, but do not necessarily have a democratic political system or are a State of law. This allows to classify countries as diverse as the Persian Gulf and the Nordic countries as possessors of "market economies", at the same time allowing that you suggested, at times, that a market economy is the same as a free market economy and, at times, than not.
Therefore, and given that there is some confusion as a tendency to identify the terms of market economy, free market and capitalism it is convenient to make some remarks.
A market economy is not necessarily equivalent to a free market, since the State can intervene in the market economy not only to ensure the rights of economic operators, but also for ensuring access to certain goods and services - generally considered of absolute human dignity need - both as to regulate basic prices and to guide the production andTherefore, consumption, and more in general, maintain the stability of economic processes.
The free market means absolute freedom of supply and demand only tolerating State intervention to guarantee freedom of competition.
That last point is central to the conception of what a 'free market' really is. Both Friedrich von Hayek and Milton Friedman have declared that economic freedom is the condition sine qua non both political freedom and a free market in general.
The above has led to arguments along the lines of: "but the image many people have of the"market economy"probably already is that of a mixed economy, as suggested by the fact that even more significant majorities support strong State regulations." That, and substantial minorities flatly against the market, explains why we live in a mixed economy and not a free economy". based on this general perception that countries that restrict market freedom restrict political and social freedoms.
The relationship with capitalism depends on what is understood by this term. If you understand why everything what is not Communist or which practice the "real socialism" - in that was used during the cold war and with some basis in use dating back to Marx - equivalence is correct. However, not everyone understands capitalism in that way (see state capitalism; Libertarian capitalism; Democratic capitalism); in which cases, and depending on the criterion, some capitalist countries would not have market economy - as understood here - or at least some of the countries that show market economy would not really capitalists. (see market socialism).
Equally, despite the fact that in the popular imagination - especially from the Western perspective - the creation of market economies in the world only has been associated to capitalism from the second half of the 19th century in Europe and more specifically in Britain and United States, that is not the case. For example, in the 18th century greater market - non-capitalist economy - was in China.
Generally considered the most prominent theorist of the model of market economy, as implemented in the U.S., was Paul Samuelson. Samuelson referred to this system as "mixed economy".

Market economy concept

The social science which is responsible for studying the processes of production, Exchange and consumption of products and services is known as economy. The term has its origin in the Greek language and means "a house management".
The market, on the other hand, is the environment that allows the development of the exchange of goods and services. It is a social institution through which buyers and sellers engage in a business relationship.
These two concepts allow us to bring us closer to the notion of market economy, which refers to the social organization aimed at facilitating the production and consumption of goods and services arising from the game between supply and demand. The State intervenes in market economy by guaranteeing access to certain goods and impose taxes and fees according to social needs.
This means that, although the market economy is generally considered just like the free market, such freedom is not absolute since the State participates in the regulation of basic prices and by other decisions. Liberalism argues, however, that the State only should involve in the free market to ensure the absence of monopolies.
The concept of market economy, on the other hand, has transcended to capitalism to derive in terms like economy of socialist market or market socialism, which involves a combination of capitalism and socialism that has the market as leading economic institution. Refers to mixed economy to appoint State and private participation in economic regulation.

Definition of market economy

The market economy is a social system of division of labour based on the private ownership of the means of production.
The market is the process that starts when various performances of multiple individuals converge together under a scheme of division of labor, so that they end up being mutually cooperative. Each acts in its own interest and benefit, but does so through the channels that best meet the needs of others.
Monetary or economic calculation is the intellectual basis of the market economy, and without him it is impossible that the objectives that any action persogue are achievable in a scheme of division of labor.
The role of the State is the create a social environment that allows the peaceful development of the market economy.
Socialism presupposes the absence of market for factors of production and the prices of these factors. Socialize industries, shops or farms is transfer the property to the State and a gradual way of implementing socialism.
The market economy and socialist economics are antithetical terms. There is a mixed economy partly Socialist and partly capitalist, because the production is directed by the market or it is organized by a planning authority.
The market economy is a social system of division of labour based on the private ownership of the means of production. Each, within such an order, acts as he advised his own interest. All, however, meet the needs of others to meet their own. The actor is invariably puts at the service of their fellow citizens. These, in turn, also serve him. Man is at the same time means and end, ultimate goal for himself and a half as collaborates with others so that they can achieve their own purposes.
The system is governed by the market. The market drives the various activities of people through those channels that allow better meet the needs of others. In the functioning of the market there is no compulsion or coercion, the State, i.e. the social apparatus of force and coercion, does not interfere with its functioning nor intervenes in those activities of citizens who directs the market itself. The Empire State is exercised on people only to prevent actions that may harm or may disrupt the operation of the market. It protects and covers the life, health and property of individuals against aggressions which, by violence or fraud, may carry out internal or external enemies. The State creates and maintains a social environment that allows the market economy to unfold peacefully. The slogan Marxist which speaks of the "anarchy of capitalist production" very accurately portrays this social organization, since it is a system that governs any dictator, where there is no economic hierarch who each point to its task and force him to comply with it. Everyone is free. Nobody is subjected to any despot, people voluntarily integrates into such a system of cooperation. Market guides them, showing them how will better achieve their own well-being and that of others. Directs all the market, unique institution that ordered the system as a whole, by giving you reason and sense.
The market is not neither a place nor a thing nor an association. The market is a process launched by the diverse actions of multiple individuals that cooperate under the regime of division of labour among themselves. The value judgements of these people, as well as the actions that arise from these appreciations are forces that determine the (constantly changing) available on the market. The situation is reflected in every moment in the structure of prices, i.e. the set of exchange rates generated by the mutual action of all those who wish to buy or sell. There is nothing inhumane or mythical having to do with the market. The commercial process is the result of certain human actions. Every phenomenon of market can be country specific elective acts of those who in the same Act.
The process of the market makes mutually cooperative actions of the various members of society. Prices illustrate the producers about what, how and how much should be produced. The market is the point where converge the performances of people and, at the time, the Center where originate.
He should be mentally distinguish the market economy of one another (imaginable but not workable) system of social cooperation under a scheme of division of labor in which the ownership of the means of production belong to society or the State. This second system is often referred to as socialism, communism, planned economy or state capitalism. The economy of market or pure capitalism, as it is also often called, and the socialist economy are antithetical terms. No mixing of both systems is possible or thinkable. There is a mixed economy, a partly capitalist system and partly Socialist. The production is directed by the market or it is ordered by the mandates of the dictatorial authority, either one-person or collegial.
In mode one can speak of intermediate system, combination of socialism and capitalism, when in a society based on private ownership of the means of production some of these are managed or owned by public entities, i.e. by the Government or any of its organs. The State or municipalities possess and administer certain holdings never tarnish the typical traits of the market economy. These companies, owned and managed by public power, are subject as private to the sovereignty of the market. They must accommodate this sovereignty when they buy raw materials, machinery or work, and when they sell their products or services. They are subject to his law and, therefore, to the will of consumers, who can go freely to them or reject them, having to strive to get benefits or, at least, to avoid losses. The Administration can compensate their losses with State funds, but it neither suppresses nor mitigates the supremacy of the market. Simply diverted the consequences to other sectors. Because the funds covering those losses will have to be raised through taxes and the consequences which such taxation will result in society and in the economic structure are always those provided for by the law of the market. It is the operation of the market - and not the State to raise taxes-that decides on who will fall the tax burden at the end and what will be the effects of this on production. It is not a State Office, who will determine the functioning of public enterprises and the market.
From the point of view praxeologico or economic, Socialist to any institution that a mode can not be called or another is completed relating to the market. Socialism, such as its theorists conceive it and define, presupposes the absence of market for factors of production and prices of these factors. "Socializing" industries, shops and farms private it is say, transfer ownership of them from individuals to the State - is undoubtedly a way of gradually implementing socialism. They are successive stages on the road that leads to socialism. However, socialism still has not been reached. Marx and the Orthodox Marxists flatly deny the possibility of this gradual approach to socialism. According to his thesis, the evolution of the capitalist order will result in that one day, suddenly, becomes socialism.
Public bodies, like the soviets, by the mere fact of buying and selling in markets, are related to the capitalist system, as evidenced by the fact that perform their calculations in monetary terms. Thus they resort to the typical intellectual tools of that capitalist order that with so much bigotry condemn.
Monetary calculation is the intellectual basis of the market economy. The objectives of the action under any scheme of division of labour are unattainable if we disregard the economic calculation. The market economy is calculated by monetary prices. Which prove possible to calculate predetermined its appearance and still affects its functioning. The market economy exists solely because you can resort to the calculation.

Definition of market economy

Market economy. It is a model that forms the basis of the actual framework in which operate the economies of many countries at present. It has as a principle the free initiative of the individual, to make decisions in the economic field both as producer, owner of resources or as a consumer. This principle empowers consumers as those who decide that goods consumed, according to their preferences and their resources. What constitutes the sovereignty of the consumer.
Producers, on the other hand, will produce for the purpose of maximize the benefit. To enable all actors to act in harmony, the system should not operate to the market. He is the central institution.
The market system recognizes two principles of base freedom and individuality. In addition, on a second level, shown according to basic institutional principles, related to the first two:
• The right to own property.
• The right to hire and Exchange freely.
• The provision of labour law.
• The freedom to undertake and take risk.
• Allows the efficient allocation of resources. Implies specialization and evaluation: each will produce anything that is better equipped.
• The competence of agents leads to achieve the most appropriate solutions for the whole (the community).
• Information and transaction costs are reduced because the decisions are made in the market. They are not centralized.
• Respects the freedoms of the individual. The behavior of each agent is not regulated directly.
• Changes in prices and competition induces the rapid introduction of innovation and technical changes to the producers.
• Imbalances tend to be temporary.
• The existence and risk of non-competitive markets. Agents try to eliminate the competition, or markets may be imperfect, there still few applicants or bidders.
• Existence of external effects. Price does not include certain costs of production, which someone else pays. I.e. someone producer or consumer sale benefited, and another injured. For example by pollution produced by the factory.
• Inadequate valuation of public goods. They don goods which still needed may not occur by the private sector, because wouldn't be any applicants willing to pay, nor producers that costearan expenses.
• Existence of yields to growing scale. The economies of large-scale production derives its long-term decreasing production costs. What, with the limitation of demand just causing the concentration on a limited number of efficient companies.
• Poor distribution of income. The distribution of income resulting from the free market responds to criteria of efficiency, but not at the beginning of equity. Market mechanisms tend to give back to the strongest (which most are). They do not provide fair responses to a situation of weakness.
• Failure in the achievement of some goals. The market economy has difficulties to solve the imbalances that occur. It does not guarantee the growth potential of an economy.
• Preferential and undesirable needs. The system allows granular access to preferable needs (health and education) and the undesirable (alcohol and tobacco). The first are necessary for everything to be human, but less accessible for vulnerable strata of society. And vice versa.
• Lack of solidarity and found conflicting positions. The market economy does not require integration into society. Its principle is the competition and not cooperation.
• Other. The system is ineffective in provoking effects when problems of great urgency.