Advantages and Disadvantages of Free Market

Topics: Capitalism, Market economy, Mixed economy Pages: 2 (522 words) Published: May 8, 2011
What are advantages and disadvantages of market economy?

There are many advantages to a free market economy. They range from the moral issues to the practical issues. We will deal mainly with the practical ones.

-Unprecedented innovation. Free markets are wrought with inventions and the capital to research them. Countries classified as having a free market have been responsible for the vast majority of inventions since the 19th century.

-Very high income mobility. This means that under a free market system it is easier to move around income brackets. This is not to say it is easy, it is just easier to become rich or poor when you're left to your own devices as opposed to a controlled economy where resources are allocated by the government.

-Massive increases in efficiency and productivity. This happens from the survival of the fittest aspect of free markets. Firms that have higher costs than others (by producing inefficiently) will go out of business as those that are more efficient prosper. Thus, firms are always looking for cheaper ways to do things (this drives costs and prices down, etc etc)

-A much higher GDP. Free market-leaning countries have higher GDPs than command market-leaning economies. This is because they produce more.

-Very productive tax system. Due to the huge wealth level, it is easy to collect taxes. For example, it is easier to get taxes from a very rich person than from a person who barely has enough money to eat. This large amount of tax revenue results in:

-More money spent on social programs. Free market nations generally spend more or have more efficient social programs. For example, the police and firefighting technologies in America and Europe far surpass those of China or many Arab states.


1 unprovision of merit goods like education,health,housing... so the poor will be deprived of the merit goods. In this way the rich becomes richer and the poor becomes poorer. 2 Non provision of public goods(bus...
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