The United States economy has variously been described as "free market," "capitalist," and "mixed." The apparent confusion here is caused partly by the differing terms and approaches of different economic schools of thought. The term "capitalist" has its origins in Marxism and tends to be used by those who disapprove of the United States system.
The approach of classical economists has generally been to see all the economies of the world as existing on a continuum from free market economies to command economies. In the former type of economy, everything is determined by the market; in the latter, everything is determined by government. It should be clear even from this summary that there is, in practice, no such thing as a pure free market or pure command economy in existence. Every government in the world exercises some control over fiscal policy, taxing its citizens and spending their money for the common good. It is difficult to see how a pure free market economy would arrange military spending, for instance.
Similarly, there is no such thing as an absolute command economy. Every system in the world contains some element of private enterprise, however much regulation the government puts in place. The truth, therefore, is that all the world's economies are mixed economies, but this insight is not very illuminating. This is why many people call the United States economy a free market economy, because it is closer to the free market end of the spectrum, having less government regulation than most other economies in the world.
There are a number of different types of economies throughout the world. Economic systems determine how the people of a country buy and sell goods and how production processes are controlled. The United States has a mixed economy based primarily on principles of private ownership. Individuals own the goods and services that they make or provide. Furthermore, private businesses control factors of production. This is known as a free enterprise system.
In addition, the United States' economic system is often characterized as a 'market system' because it is controlled by the market. The market is where producers and consumers come together in the exchange of goods and services. This interaction drives prices in the United States, unlike in many other countries where prices for certain goods are set by the government.
The reason that the United States' economic system is considered to be a mixed system is because the government is involved in the regulation and guidance of the United States' economy. Although it is more 'hands-off' than in some countries, the U.S. government still plays a significant role in the country's economy. There are a number of services which are provided by the government in the United States in lieu of private business. These services include: education, roads, postal systems, policing, the court system, and more.
Further Reading
United States is essentially a mixed economy as mentioned and although it is regarded as a capitalist regime it does not entirely fulfill the requirements to be...
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referred as such. To explain this point we should further look into these requirements and determine which ones have been fulfilled and what aspect of the economy blends with these requirements to make it a mixed economy. According to Adam Smith a Scottish philosopher who contributed immensely to the fundamentals of capitalism states that for an economic system to be regarded as purely capitalistic it must satisfy the following:-
- Private property rights- These are policies that ensure the property rights of an individual are protected. This offers individuals an opportunity to privately own or make claims of ownership on a particular property.
- Self interest- This is the need of people to pursue actions that will benefit them and their families.
- Freedom of choice- This allows individuals or people to respond to the market for instance a marketer will market a product but it is your choice to either buy or reject the offer.
- Market prices- prices of goods and services are determined by the market forces of demand and supply.
- Competition- This ensures that no single producer gains monopoly of the market. New and existing businesses are motivated to enter the market to satisfy its varied needs.
United States seems to satisfy all the above but it is important to note that the government is in control of major aspects of the economy such as health and education. Since the Great depression the government has continued to grow regulations in certain sectors of the economy with regards to some of the points forwarded by Adam Smith to ensure equitable gains for all its citizens. This eventually led to the establishment of the current mixed economy a shift from pure capitalism.
The United States has a mixed economy. It is a combination of a free market economy and a command economy. Compared with most other countries around the world, it is more towards a free market economy and less towards a command economy.
In most ways, the US has a market economy. People can pretty much do what they want to do economically -- they can go into whatever business they want, make whatever they want, etc. But there are aspects of a command economy. There is a minimum wage, for example. Also, there are environmental rules and safety rules and other such things.
On the whole, though, the US is pretty much of a free market economy.
The United States is said to have what kind of economic system?
The United States is best categorized as a mixed economy. There is some (many would say too much, many others not enough) regulation of the economy by the government. This means that the United States (nor any other economy) is not really a pure market economy. The economy, however, is still based on private property, and most economic decisions are made based on market forces, so it is not what is often called a command economy.
For example, business owners determine what wages they will pay based on market forces. If they pay too much, their labor costs will be too high relative to their competitors and their income, and they might lose money. If they pay too little, they might find it difficult to find qualified workers and suffer a labor shortage. But the government, both at the federal level and in many states and municipalities, sets a minimum wage by law in order to achieve the social goal of having every worker be able to make a living. So private or corporate business owners make economic decisions based on market forces, but within limits set by the government.