My understanding of a market economy is where decisions are based on supply and demand, in regards to any investment, any production, and distribution of funds; it is where the prices of goods and services are determined. The activity in a market economy is unplanned; it is not organized by any central authority and is determined by the supply and demand of goods and services. Alternatively, a command economy is organized by government officials who also own and direct the factors of production. "Capitalism" is conventionally defined along economic terms such as the following: An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market. (Dictionary 2016)
Pros and cons of Capitalism
Capitalism is an economic system characterized by:
Lack of government intervention
Means of production owned by private firms.
Goods and services distributed according to price mechanism (as opposed to government price controls) Pros of Capitalism
Economic freedom helps political freedom. If governments own the means of production and set prices, it invariably leads to a powerful state and creates a large bureaucracy which may extend into other areas of life.
Efficiency. Firms in a capitalist based society face incentives to be efficient and produce goods which are in demand. These incentives create the pressures to cut costs and avoid waste. State owned firms often tend to be more inefficient (e.g. less willing to get rid of surplus workers and less incentives to try new innovative working practices.)
Economic growth. With firms and individuals facing incentives to be innovative and work ha...
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... this problem, one that is part of Obamacare, is to force everyone to buy insurance and contribute to the care they get.
A second problem, an information problem, is called adverse selection. If people know more about their own health than their insurance companies, as they likely do, they will sort themselves in a way that leaves only the most expensive and unprofitable patients in the market. Forcing people into large pools that do not allow individuals to self-sort according to how likely they are to need expensive care – again a feature of Obamacare – can overcome this problem.
There are many other market failures in health care markets, e.g. patients not knowing enough about treatments to be informed consumers, and all of them can be mostly resolved through government managed health care systems such as those adopted in other developed countries. (Fiscal 2013)
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