Home List of Pros and Cons 3 Pros and Cons of Market Economy

3 Pros and Cons of Market Economy

In the world, there has always existed different types of economic systems. While these systems have varied over time, the fact remains that some are better than others. One of the most popular systems of trade and finance is the market economy. While the economy isn’t perfect, it is a type of economy that was very popular in modern societies that emerged with strong banking and financial sectors. Many of the tenets of the original market economy no longer exist, but still, it’s a fascinating economic system to explore.

The Pros of Market Economy

Encourages Competition
For one, the market economy is great because it encourages competition. The essence of a good economy is a competitive economy. Without competition, it’s impossible for an economy to thrive and survive, but in the long run, one of these economies is more than capable of getting the job done, assuming there are enough competitors in the market place to make things interesting. This is one of the pros of this economic system. The fact that it rewards those who are the most competitive is one of the primary reasons it is phenomenal in smaller markets.

Consumers Win in the Long Run
It also allows consumers to win out in the long run. Rather than buying weak products that lack innovation or good prices, a market ensures that only the best products win out. This ensures that consumers that want to get the best products can depend on the unseen market factors (as referenced by renowned economist Adam Smith) to sort things out, rather than a third-party handler. However, the market economy is not without problems, and these problems are some of the primary reasons a modern market economy is no longer feasible.

The Cons of Market Economy

Can Be Rigged
When it comes to market economies, there are a lot of reasons why people are not in favor of them. For one, the markets can be rigged. If several competitors in a market collude to eliminate everyone else in the market, then it can end up very unfavorably for other players in the market. It’s also possible that someone in the market can undercut everyone, eliminate everyone else, and buy up the market for themselves. In short, the lack of regulations is one of the reasons the market economy is doomed to fail. But it can be fixed.

Overall, most modern economies rely on a mixed economy—one that includes the free market ideals of a market economy, but also encourages regulation and order.

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