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The Mixed Market and the Command/Planned Economy.

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Introduction

The Mixed Market and the Command/Planned Economy An economic system is the way in which a the world organizes itself to address the problem of scarcity. The two main economic systems currently the most widespread in the world are the mixed market economy (with only market organization), and the planned economy (with only planned organization). in spite of there being two main economic systems, the majority of the world still prefers to follow the market system idea, as it is considered to be more successful. Nevertheless, there are of course qualities to both economies. While the qualities of the mixed market economy lie more from an individual's standpoint, the command economy's qualities theoretically are meant to benefit the nation. In modern industrialized countries (where change has been rapid since the industrial revolution), the choice of resource allocation (the assignment of resources to specific uses) is between using a mixed market or a planned economy. Glanville also states that, "the ideology between the two was a major divisive force between communist countries of eastern Europe and China, as well as in democratic countries of the west after World War 2". ...read more.

Middle

Firms and consumers are allowed to (and should) take risks in the economy, which enables the individuals to attain a high profit. This is definitely another merit of the economy, because in parallel, people are able to achieve a higher standard of living. Lastly, there is a limited role for the government in a market economy, and this definitely offers many merits to the system. The government is only allowed to regulate firms (to make sure there are no monopolies, which means that there is more chance to have a higher income), to tax and spend (meaning that in the end, the individual gets the luxury of welfare), and to legislate certain issues (such as determining a minimum wage law, which ensures that one will have enough money for the bare essentials). All of these factors then combine with others, such as the price mechanism to create a very successful form of economy, that the majority of the world is pleased with. Although many people will disagree with these claims, there are also merits to a command economy. While the mixed market economy is more focused on the benefit of the individual, the command economy aims to benefit the nation as a whole. ...read more.

Conclusion

According to Encarta, "studies of trends from the 1950s to the 1970s show countries with centrally planned economies equaling and even exceeding growth rates of capitalist economies". Command economies also achieve higher literacy rates, basic health care available to the population (and better welfare), as well as eliminating extreme poverty and avoiding unemployment. Although one cannot absolutely claim whether the theory of a market economy is better than that of a command economy or not, it has been proven factually that a mixed market economy is more successful. Both of them have merits and advantages, but however, there is one factor which, when assessed, makes the mixed market economy a more rewarding one. The aim of each country is to get as close as possible to its production possibility frontier, as the closer a country is, the better the standard of living. As seen in the past, Soviet Russia had less unemployment and resources were being allocated more effectively, yet the standard of living was still higher in the United States. This is because the U.S.A. became rich because of enterprise and its adaptation of a free market, where people were taking risks. Thus, this could explain why countries, when choosing whether the market economy or command economy is more profitable, usually choose the market economy, based on the assessment of its merits. ...read more.

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