Evaluation of the Free Market Economy
It is essential for every society to have some type of economic system in order to utilize their scarce resources to satisfy people’s unlimited wants. One specific type of economic system is the free market economy; an economy that is based off the citizens choice and not directed by the government. In this economy people can buy and sell goods and services, and this is completely controlled by consumers and producers. Every economy has advantages and disadvantages but in this case the free market’s disadvantages outweigh its advantages.
A free market has fewer disadvantages to list but the value of what is lost is much greater than the benefits. Limited government involvement, also described as laissez faire, means that the young and poor will not have any means of support or benefits. Sick people will be too ill to be able to take care of themselves leaving them alone and without public health care. The society will also be in harm due to no national defense or security. Citizens will also be deprived from benefiting from programs such as Social Security and financial aid.
Another disadvantage also comes from little government involvement. With limited government involvement an unequal distribution of wealth will then be created. Some people will have much more money than they need and others will be in need of more economic support. Some workers might be paid too little and then they will not be able to consume as much as production calls for, therefore leaving the economy in a state of disarray. Another impact of little government involvement that affects everybody in all classes is the lack of national defense.
No matter how much money someone has they would not pay for protection that could easily be provided for free. Without the benefits that government involvement can aid us with many people would be left struggling, that is why the disadvantages outweigh the rest. A free market economy has many advantages such as consumer sovereignty, specialization, and voluntary exchange. A free market economy allows people to have their own economic choice, essentially the consumers will decide on what they do and do not want to purchase, which is known as consumer sovereignty.
If there is a product that consumers are buying less of, the company will stop producing it and focus on a new product or a product that is in high demand – this is an example of consumer sovereignty. Although this provides incentive it also leads to a cycle of people spending their money on unnecessary items; also known as wants. Another feature also seen as an advantage is specialization- individuals concentrate their efforts in the activities or careers that they do best. A teacher will specialize in teaching to make money in order to purchase a phone that someone else specialized in producing.
Lastly, the third feature with an advantage is voluntary exchange. It is the trade in which both parties involved anticipate the benefits that will outweigh the cost. It motivates profit and provides an incentive for competition. An example is the motivation of self- interest; a consumer buys private property from another to fulfill his wants or needs and also creates a profit for the owner. Although a free market economy has these advantages, the disadvantages are of much more importance.
All in all a free market economy has a great amount of freedoms that citizens appreciate, but they do not take into consideration the benefits that may be lost in a free market. Although a free market economy is composed of six features; consumer sovereignty, specialization, voluntary exchange and limited government involvement are the key ones. Those four features are the main advantages and disadvantages of the free market economy and they all make a huge difference. A free market has its advantages and disadvantages but the disadvantages override the advantages.