April 07, 2010
Fall of a Tyrant, Rise of a Titan
The world is made up economy and ego, so how does economy work? Economy is composed by the labor, capital, and natural resources that economic agents used as their motors to determinate the production, distribution, and consumption of the different goods and services generated to enlargeprofit and pursuit the well-being of the individuals, as a consequence (Frank, R. & Bernanke, B., 2007; McConnell, C. & Brue, S., 2002). However, there are a lot people in this world with different ideas, principles, goals, dreams, and so on. Therefore, the economy varies widely and it has been necessary to create certain models and systems to rule it in a complex world (Frank, R. et al.,2007; McConnell, C. et al., 2002). Some economy systems are the command economy and the market economy. Both economy systems are opposed one to the other. The differences among the two systems lead to the economic biggest concern: is command economy better than market economy? Or is market economy better than command economy?
Primarily, a command economy or planned economy is a display ofan economic model in which the government exercises the supreme authority regarding the goods and services in the economy: supply and price (Command Economy, n.d.; Centrally Planned Economy, n.d.; Frank, R. et al., 2007; McConnell, C. et al., 2002). Under a command economy, state-owned and private endeavors obey the government’s guidance and directives dealing with production, allocation,pricing, and consumption of the goods and services focusing on the collective needs (Command Economy, n.d.). On the other hand, a market economy is an economy system ruled by the free market in which the ¨invisible hand¨ of supply and demand allowed the private investors to make the pricing, production, allocation, and consumption of the goods and services require by the individual’s needs (Frank, R. etal., 2007; Market Economy, n.d.; McConnell, C. et al., 2002).Under the market economy, everybody is motivated by selfish interests to satisfy his or her own needs that in the long or short-run fulfill the necessity of the entire population; thus it is a result of human actions and the price exercise the ultimate authority in determining the interaction of the forces of the market (Frank, R. etal., 2007; Market Economy, n.d.; McConnell, C. et al., 2002; Ollman, B., 1999; The Market, n.d.).
Like command economy, market economy has a lot of characteristics. Command economy main characteristic is the power that government exercises in deciding ¨who produce what, where it is produced, how much it costs, and where it goes¨ (Command Economy, n.d.; McConnell, C. et al., 2002). Anothercharacteristic is its allocation of resources to deal with the needs of the majority leading to a more stable economicsurplus and unemployment remain at reasonable level that responds better to downturns and inflation (Command Economy, n.d.; Centrally Planned, n.d.; Characteristics of a Command Economy, n.d.; McConnell, C. et al., 2002). Command economy eradicates profit-making process by givingequal opportunities to all and reducing the money’s role since education and health services are offered to the entire population on equal bases (Characteristics, n.d.). In contrast, under a market economy the market prices warn the private owners, investors, and producers about ¨what to produce, how to produce it, and how much it costs¨ (Market Economy, n.d.). A remarkable characteristic is itsflexibility and decentralized nature that made decisions through the ¨invisible hand¨ promoting the welfare of other people and its own at the same time (McConnell, C. et al., 2002; The Market, n.d.; Ollman, B. 1999). Also, the market economy multiples wealth in a gradual process of evolution for the invention of price structure: exemplified by the money prices to goods and services that can be...
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