Bus 212 - Economic System Effectiveness

Economic System Effectiveness

BUS/212

5/16/2016

Economic System Effectiveness

They are two major economic systems operating in the world today. The free market economic system encompass the capitalist views and the command economic system leans more toward a socialist or at its extreme a communist view. Both systems when manifested in its strictest form presents many disadvantages. Many nations use a mixture of both the free market and command economic systems to create and distribute goods and services. My goal is to compare these two economic systems and form my resolutions as to which economic system I would prefer to have in the country where I operate my business.

Free market economies exist when the market controls what goods and services get produced, distributed and how the economy grows (Nickels, McHugh, & McHugh, 2016, p. 43).  The consumer propels this economic system and creates the demand for goods and services, and prices also help to determine the supply of goods and services. The free market is Capitalism at its best where a majority of the resources like land are owned and controlled by individuals who compete to earn profits and keep the profits for themselves. The command market, on the other hand, is controlled by the government which regulates the supply and demand of goods and services. The socialist and communist values are the thread that forms a command economy. In socialist economies, the government takes control of basic resources that citizens need to survive like health care and utilities to create a more even distribution of those resources. Communism is an extreme version of socialism because the government, in this case, controls all or most the goods and services and citizens have to follow strict rules and guidelines to gain access the basics for their survival. In the command economy the consumer in the does not have much of a voice command, citizens have to follow and accept the provisions afforded to them by their government. The problem is that the government can overestimate or underestimate the needs of the people and create waste of lack. The two major economic systems both have advantages and disadvantages; however, I must note that more of the advantages from my observations come from the free market which is the more popular of the two. To compare the two economic systems, I will explore the economic and social differences of each system.

In the free market system citizens are encouraged to create and developed businesses that cater to the needs of the public for personal gain. The government makes and enforces laws and regulations that foster creativity and growth for the economy. According to Nickels, McHugh, and McHugh (2016), Capitalism is governed by four rights for it citizens who are to own private property, to own business and keep all the profits, freedom of competition, freedom of choice (P. 35). In this environment, someone poor can have the opportunity to work their way out of poverty. Citizens have more freedom and opportunity, and that serves as their primary motivator. In turn, more businesses are created, and the economy grows. Different to the free market systems, in command economies, citizens are less motivates to be creative and invent new this to meet their needs. High taxation stifles entrepreneurs and causes them to take fewer risks in growing their business. The lack of incentives for the smartest citizens who possess the knowledge to invent solutions to many of the nation’s problems will cause them to migrate. And the departure hurts the economy and in many cases create lack and scarcity of essential resources which in turn creates fear and chaos among citizens.