Which Economic System Is The Best
Which economic system do you think is most effective: market, planned, or mixed?
Economics is concerned with the production and distribution of products and resources. It answers the question of what to produce, how to produce and how to distribute the products. There exist a variety of economic systems but their difference lies in how they answer the economic questions.
A market economic system is a system where decisions about production and distribution are made by the market forces of demand and supply without government interference.
A planned economic system is a system that relies on a central institution such as the government to make major decisions about production and distribution.
A mixed economic system is a system that blends aspects of market and planned economic systems. The central institution provides controls for the economy but also leaves room for the market forces of demand and supply to influence the system.
In that case, a mixed economy would be preferable because the people get to benefit from the market forces of demand and supply but they are also protected by central unit controls on the same. It is important to understand that there are aspects of the economy that are too sensitive to be left under the control of market forces, such as a country’s infrastructure.
This is, of course, a matter of opinion. My own opinion is that a mixed economy is the best economic system. Specifically, I would argue that the best economy is one that is based mainly on market principles but which has some amount of government involvement.
Market economies are, in general, a good thing. Market economies allow consumers to have the greatest possible choice. They allow consumers to have the best quality of products at the lowest prices. All of these things happen “automatically” because businesses compete to make profits. This is a good situation for consumers. Market economies are also good because they allow people to have the greatest possible amount of economic freedom.
However, a pure market economy would not be so great. For example, in a pure market economy, there would be no laws to protect workers from having to work long hours. There would be no minimum wage laws. There would be no consumer protection laws. Without laws like these, there would be too much room for businesses to abuse workers and consumers.
Therefore, a market economy with some protections imposed by the government is, in my view, the best system.
Pure economic systems are a theoretical construct but I don't think they actually exist in reality. Even in some of the most authoritarian and rigid planned economies such as that of North Korea, there are limited amounts of informal or other free market transactions. Similarly, free market economies such as that of the United States and most other developed nations, regulate, provide, or control certain products and services in such areas as medicine, utilities, education, and transportation. All systems are therefore mixed to a certain degree.
Of mixed systems, some tend more towards market and some tend more towards planned models. Which type of system works best depends on the nature of economy. Examples like that of China show that central planning can be quite effective for countries that are rapidly industrializing, but many free market economies are also quite successful. Perhaps what countries need most is to be flexible and responsive. A country engaged in large scale warfare or in a major economic transition probably needs a far greater degree of planning than a country enjoying peace and prosperity.