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Is the mix in the UK economy about right?

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Introduction

Is the mix in the UK economy about right? The UK economy combines factors of both a free market economy and one which is fully planned. This brings both advantages and disadvantages as it limits the power of market forces, but on the other hand restricts the influence the government has over supply and demand. Since the 1980s the government in the UK has steadily reduced its involvement in the economic system. This has been done through privatisation, which means handing over control of services to private companies and investors, for example British Gas or Railtrack. A free market economy revolves around the central concept of supply and demand. Consumers make individual decisions about purchases for their own self-interest whilst producers aim to make the largest profits by supplying exactly what the consumers desire. Resources are not allocated by the government or any state organisation but via the price mechanism. This means that the producers determine the supply and the consumers determine the demand, the combination of these two factors determines the price of a product. ...read more.

Middle

and there is an overproduce of demerit goods such as tobacco and alcohol. Another disadvantage of the system is that the prices of goods only take into account the private costs to the producer and do not include social costs or impacts, something which may be more closely examined under a planned economy. The lack of governmental power makes the economy unregulated and it is prone to booms and slumps for which there is no protection. A planned economy is one in which all resources are owned and allocated by the state, this is known a public enterprise. All key economic decisions are undertaken by the government, as is the distribution of wealth. In such an economy, factors such as profit incentives or price mechanisms are not allowed to determine what is produced and how it is produced. Production is said to be for use rather than for profit. The planners in this economy must first decide upon the production potential of the state and then must decide how best to allocate resources to maximise this potential. ...read more.

Conclusion

Public sector control of public goods such as education and health prevents market failure in these areas and governmental control helps to curb inflation, and unemployment as well as ensuring growth. Privatisation in the 1980s moved Britain closer to being a free market economy than a planned one, but the mix between the two is still fairly equal. Many privatisations have been a success, such as British Telecom, British Gas, and have provided the same service as a nationalised company whilst remaining competitive. However, others such as the privatisation of the UK's rail network have no been so successful and many people yearn for a return to state control. Personally, I feel that the mix between market and planned economies in the UK is about right, although there are some services such as the aforementioned rail network which I believe may be better run in the hands of the government. On the other hand, if privatisation reduces taxes and enable the government to concentrate on more essential services such as health and education, then privatisation may be the way forward. Jonathan Walker ...read more.

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