University:
London School of Economics and Political Science
Course:
L400 | International Social and Public Policy
Academic year:

2024
Views:

255

Pages:

6
Author:

Prerna T

Economic Systems: Free Market. Mixed and Command Economies The methods/institutions by which an economy allocates resources/resolves the basic problem of what, how and for whom to produce Starter task. What does it show....... What does it suggest are possible differences between the two countries? Where is this? The sliding scale diagram......add annotations to it Free Market Economy Mixed Economy ↓ Command Economy ↓ 100% 50% 0% % of resources which are allocated by the PM Free market and command economies are 'extremes', no economy is either pure market or pure command North Korea perhaps comes closest • In reality the vast majority of economies are a mixture of both private enterprise (allocation by the PM) and state intervention (state allocation of resources) and are therefore Mixed Economies eg. the UK where 60% of resources are allocated by the private sector and 40% by the state...government in the UK is a major provider of education, healthcare, social services, defence, law • In some other European countries eg. Sweden the size of the public sector is larger • But in the US and Canada it is smaller But they are all Mixed Economies Free market economy: characteristics and evaluation (ads and disads) • Where markets allocate resources through the price mechanism....an economy in which market forces are allowed to guide the allocation of resources. Where decisions on what, how and for whom to produce are left to the operation of the price mechanism eg......an increase in demand raises price and encourages businesses to use more resources into the production of that good or service. • The quantity of products consumed by people depends on their income and income itself depends on the market value of an individual's work. Very limited role for the government.... a 'Laisser Faire' approach to organising the economy Factors of production are all owned privately • Competition is a regulatory factor and self interest/ profit the driving force Associated with the work of Adam Smith and Friedrich Hayek....possible research task Who are today's free market economies? Hong Kong, Japan, USA, Malaysia, Thailand BUT remember NO pure FMEs....eg. US and Hong Kong are still strictly speaking mixed economies