Market-based Economy

A Market-based Economy is an economy that relies on market mechanisms for the allocation, production, distribution, and exchange of goods and services through price signals and supply and demand dynamics.

• AKA: Market Economy, Free Market System, Capitalist Economy, Market-driven Economy.
• Context:
  • It can (typically) allocate Economic Resources through market-based price signals and market-based supply and demand interactions.
  • It can (typically) determine Market Prices via market-based competitive bidding and market-based voluntary exchange.
  • It can (typically) facilitate Economic Coordination through market-based decentralized decision-making and market-based price system.
  • It can (typically) create Market Incentives via market-based profit motives and market-based consumer preferences.
  • It can (typically) enable Economic Efficiency through market-based resource optimization and market-based competitive pressure.
  • It can (typically) be affected by Market-based Supply and Demand Behaviors across various market-based economic sectors.
  • It can (typically) be modeled as a Market-based Competitive Human System with market-based actors pursuing market-based rational interests.
  • ...
  • It can (often) generate Market Innovation through market-based entrepreneurial activity and market-based creative destruction.
  • It can (often) produce Market Inequality via market-based wealth concentration and market-based income disparity.
  • It can (often) experience Market Failure due to market-based information asymmetry, market-based externalities, and market-based monopolistic tendencies.
  • It can (often) form Market Institutions to facilitate market-based transactions and market-based contract enforcement.
  • It can (often) create Market Networks across market-based geographic regions and market-based industry sectors.
  • It can (often) develop Market Specialization through market-based comparative advantages and market-based trade benefits.
  • It can (often) require Market Regulation to correct market-based imperfections and protect market-based public interest.
  • ...
  • It can range from being a Mixed Market-based Economy to being a Pure Market-based Economy, depending on its market-based government intervention level.
  • It can range from being a Lightly-Regulated Market-based Economy to being a Tightly-regulated Market-based Economy (such as a Protectionist Market-based Economy), depending on its market-based regulatory intensity.
  • It can range from being a Well-Functioning Market-based Economy to being a Failed Market-based Economy, depending on its market-based efficiency level.
  • It can range from being a National Market-based Economy to being a Municipal Market-based Economy (such as Hong Kong Market-based Economy), depending on its market-based geographic scope.
  • It can range from being a Traditional Market-based Economy to being a Digital Market-based Economy, depending on its market-based technological foundation.
  • It can range from being a Developing Market-based Economy to being a Developed Market-based Economy, depending on its market-based maturity level.
  • It can range from being a Closed Market-based Economy to being an Open Market-based Economy, depending on its market-based international integration.
  • ...
  • It can provide Market Opportunitys through market-based business formation and market-based consumer choices.
  • It can foster Market Competition via market-based entry freedom and market-based price flexibility.
  • It can enable Market Growth through market-based capital investment and market-based productivity improvement.
  • It can facilitate Market Exchange via market-based currency use and market-based transaction platforms.
  • It can support Market Discovery through market-based experimentation and market-based information aggregation.
  • ...
  • It can be Market Efficient in market-based resource allocation contexts.
  • It can be Market Responsive during market-based demand shift periods.
  • It can be Market Dynamic within market-based competitive environments.
  • It can be Market Volatile during market-based uncertainty conditions.
  • It can be Market Innovative through market-based technological adoption processes.
  • ...
• Examples:
  • Market-based Economy Types by market-based regulation level, such as:
    • Liberal Market-based Economies, such as:
      • United States Market-based Economy with market-based financial systems and market-based flexible labor markets.
      • United Kingdom Market-based Economy with market-based service sector and market-based financial centers.
    • Coordinated Market-based Economies, such as:
      • German Market-based Economy with market-based social partnerships and market-based vocational training.
      • Japanese Market-based Economy with market-based industrial policy and market-based corporate governance.
  • Market-based Economy Types by market-based development stage, such as:
    • Advanced Market-based Economies, such as:
      • Canadian Market-based Economy with market-based resource sectors and market-based international trade.
      • Australian Market-based Economy with market-based commodity exports and market-based services sector.
    • Emerging Market-based Economies, such as:
      • Brazilian Market-based Economy with market-based agricultural exports and market-based industrial development.
      • Indian Market-based Economy with market-based service industry and market-based technology sectors.
  • Market-based Economy Types by market-based geographic scope, such as:
    • Regional Market-based Economies, such as:
      • European Single Market Economy with market-based cross-border trade and market-based regulatory harmonization.
      • ASEAN Market-based Economy with market-based regional integration and market-based trade facilitation.
    • City Market-based Economies, such as:
      • Hong Kong Market-based Economy with market-based free port status and market-based financial services.
      • Singapore Market-based Economy with market-based trade hub functions and market-based business environment.
      • San Francisco Market-based Economy with market-based technology clusters and market-based venture capital.
  • ...
• Counter-Examples:
  • A Centrally-managed Economy, which utilizes central planning rather than market-based price mechanisms for resource allocation and economic coordination.
  • A Command Economy, which relies on administrative directives and planned production quotas instead of market-based supply and demand signals.
  • A Statist Economic System / Socialist Economy, such as North Korea's Economy, which prioritizes state ownership and collective economic goals over market-based private interests.
  • A Traditional Subsistence Economy, which focuses on self-sufficiency and direct production for use rather than market-based exchange for profit.
  • An Anarchist Economic System, which rejects both market-based property rights and state-based economic coordination.
  • A Gift Economy, which distributes goods and services according to social obligations rather than market-based exchange value.
• See: Economic System, Competitive Multiagent System, Mixed Economy, Global Economy, European Economy, Economic Rationalism, Capitalistic Economy, Socio-Economic System, Free Market, Invisible Hand, Market Failure, Market Structure, Perfect Competition, Supply and Demand, Adam Smith, Friedrich Hayek, Milton Friedman.

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References

2013

• http://en.wikipedia.org/wiki/Market_economy
  • A market economy is an economy in which decisions regarding investment, production and distribution are based on supply and demand, and prices of goods and services are determined in a free price system. The major defining characteristic of a market economy is that decisions regarding investments and the allocation of producer goods is accomplished primarily through markets. This is contrasted with a planned economy, where investment and production decisions are embodied in a plan of production.

    Market economies can range from hypothetical laissez-faire and free market variants to regulated markets and interventionist variants. In reality market economies do not exist in pure form, since societies and governments regulate them to varying degrees. Most existing market economies include a degree of economic planning or state-directed activity, and are thus classified as mixed economies. The term free-market economy is sometimes used synonymously with market economy, but it may also refer to laissez-faire or Free-market anarchism.

    Market economies do not logically presuppose the existence of private property in the means of production; a market economy can consist of various types of cooperatives, collectives or autonomous state agencies that buy and sell capital goods with each other in a free price system. There are many variations of market socialism that involve employee-owned enterprises based on self-management that operate in markets, as well as models that involve public ownership of the means of production where capital goods are distributed through markets.

    The term market economy used by itself can be somewhat misleading. For example, the United States constitutes a mixed economy (substantial market regulation, agricultural subsidies, extensive government-funded research and development, Medicare/Medicaid), yet at the same time it is foundationally rooted in a market economy. Different perspectives exist as to how strong a role the government should have in both guiding the market economy and addressing the inequalities the market produces.

Modern Works

• Gregory, P., & Stuart, R. (2004). Comparing Economic Systems in the Twenty-First Century, Seventh Edition. George Hoffman. ISBN 0-618-26181-8.
• Altvater, E. (1993). The Future of the Market: An Essay on the Regulation of Money and Nature After the Collapse of "Actually Existing Socialism". Verso.
• Bockman, J. (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. ISBN 978-0-8047-7566-3.

Classic Works

• Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations.
• Hayek, F. A. (1944). The Road to Serfdom.
• Friedman, M. (1962). Capitalism and Freedom.

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