Characteristics of a Market Economy - Essay Example

?The Essay is Centered and Capitalized Free-market economic system is found to be more effective than mixed economy because of several reasons.Free market system is naturally able to impart efficiency because in this system of economy nothing would restrict customers from buying products from the company they choose. If they are unhappy with a company they can comfortably shift their interest towards another company. Certain companies, being inefficient, resort to price increase in order to compensate for their inefficient method of working. Price rise would lessen the demand for its products. Free market economic system induces competition among different companies for there is no external evaluation. Presence of numerous competing companies brings great benefits to the consumers. Each company would strive to give their best as they would be thrown out of the market if found inferior. Free market permits full competition between companies. This would force companies to offer their best goods and services so that they will not be neglected by the consumers. Companies would compete in making better cheaper products in free market economies. Higher quality services and excellent products would fill the market because of competing companies. Free market also offers better freedom to consumers as they would be free to buy what they choose. Free market is therefore considered more effective than other economic systems. Mixed economy does not offer freedom and choice for consumers as well as companies. Restrictions, interferences and extreme control over business activities would discourage businesses. Excessive control would also make businesses incur more costs. Restrictions would limit certain companies with providing competitive products and services. This would make consumers deprived of numerous choices that they enjoy in a free market system. Mixed economy system is thus considered less efficient than free market system. Free market system does not impart compulsory taxation. Taxes are voluntarily paid in this economic system. People who are troubled by taxes would thus be relieved if free market system is established. People would not be compulsorily made to pay taxes without their consent in a free market economic system. Avoiding taxation would solve several problems, including unemployment in the economy. If free market system is imposed, business would flourish, producing varieties of products. More people would continue to buy products and services as numerous varieties of products and services arrive in the market. As businesses grow and flourish more people would be hired for work. This would lessen the problem of unemployment in the society. If businesses flourish and expand the society would be freed of unemployment. This would stimulate the economy and brings an overall growth. In a mixed economy there would be heavy taxation and external interferences. Excessive taxation would affect the incentives and benefits directly. This would discourage people so that they would not work efficiently. Lack of incentives dishearten employees and make them deliver less work. This would affect companies and the products they offer. This hampers development in all sectors of the society. Mixed economic system is thus considered less efficient than a free market economy. In a free market economic system agreements are made faster compared to a mixed economy system. Interference from government would slow down the agreements in a mixed economy system. Governments are notoriously slow in making decisions and implementing it. Policy making takes its own time and delays all the subsequent activities. Government would make decisions and assign the work to the concerned departments. This allocation, decision-making and implementation lag and often shift towards a pending status. Allocation of resources and its disbursement also get delayed in a system where government is in control. In a free market economic system such delays and laggings are absent as there is no intervention or restriction from the government. Agreements and implementations quickly happen because of the absence of hindrances. Government plays no role in the decision making and businesses processes. When a problem arises in a mixed economy system government has to interfere in solving the problem. Government intervention would time as government needs to assign the particular wing for solving the problem. In a free market system problems would be solved in no time as no external intervention is required. Competing companies and market forces would make every effort to solve problems and get the businesses in order. Companies strive to maximize profits and do their best to provide excellent products and services to satisfy the consumers. Private businesses effectively handle their problems. They do not have the headache of deciding the amount of tax that the consumers need to pay. People are not compelled to pay taxes. They voluntarily pay what they are supposed to pay. Common man is less burdened with taxed. Businesses effectively handle this by adjusting it in their own budget. Burdening consumers would destroy their purchasing power and affect the economy from all sides. Mixed economy burdens public and handicaps companies and businesses. Such an economic system would only cripple the economy instead of allowing free growth and expansion. Burdening people with low economic power would also aggravate inequality in the economy. A free market is founded on the demand and supply forces. Demand and supply forces would ensure proper flow in the market. Proper flow would ensure the growth of businesses and economy. A mixed economy has numerous rules and regulations to follow. They are supposed to move as per a price guideline. This price guideline may affect the quality of the products and services. Mixed economy is thus deemed less efficient than a free market economy where freedom and absence of delays and restrictions bring quick growth and prosperity. Mixed economy has to endure interferences from private sector as well as the state. This is sure to cause inefficient outcomes as interference from contradictory forces cause clashes and confusions. Conclusion A free market economy is thus more effective compared to a mixed economy. From the experiences of nations where mixed economic system runs we see that government regulations have made companies incur high costs to such an extent that certain companies have stopped working because of the losses they suffer. Even government interferences that appear to be brilliant have caused unforeseen negative or even destructive effects that ruin the businesses and collapse the economy. Further, if government interventions and directions are not properly designed and implemented it will not suit the businesses and brings wasteful outcomes. Nations with mixed economies would have gained better business growth and economic growth if they had considered implementing free market economic system. Mixed economy often fails to achieve what they aim as they are troubled by regulations that are uncalled for. Free market economic system is therefore considered effective than a mixed economic system. References Cindy Grigg, Characteristics of a Market Economy, Available at http://mrsarudi.wikispaces.com/file/view/characteristics+of+a+market+economy.pdf Enrico Colombatto, Free-Market Economies, Rule Of Law And Policy-Making, Available at http://web.econ.unito.it/colombatto/kluw1.pdf Read More