...TECHNOLOGICAL EFFICIENCY AND FREE MARKET ECONOMIES Evans Gwaro Kisii University 15th July, 2016 Technological Efficiency and Free Market Economies Betz (2011) defines technology as the ability to influence any piece of knowledge to suite the best interest of human nature. While, on the other hand, Zupan (2011) refers a free market to system in which the prices for goods and services are agreed freely by accord between vendors and users, in which the rules and requirements on supply and demand are not interfered with by the authorities, price-setting monopoly, or other power. Free markets have various merits. The most accepted is the extension of individual choice, through commonly appreciated give-and-take situation. Subsequently, free market differs with a regulated market, where the government intercedes in supply and demand through non-market approaches that include regulations forming obstructions to market entry and/or directly setting prices. As such, the concept of a free market is where prices are structured by the equivalent demand and supply opportunities. Subsequently, as aforementioned, the influence of choice which enshrines to the free market alignment employs preeminent use of discrete entrepreneurial skills which inspires technology advancement. Essentially, in a free market economy, there are three components that include competition, active but limited government, and the self-interest. Competition in the market place provides quality goods to consumers...
Words: 1012 - Pages: 5
...Question Compare & contrast a market economy and a planned economy in terms of the following; provision of public goods, production and consumption of merit and demerit goods, consumer sovereignty and equity in income distribution. (30marks). A market economy is an economic system where the factors of production, are privately owned, consumers and producers are motivated by self interest, the level of competition in the markets is very high and resources are allocated through the price mechanism. The definition is supported by Lipsey (1992) who also state that decisions about resources allocation are made without any central direction but instead as a result of innumerable independent decision taken by individual producers & consumers hence in the market economy the individuals or market makes the ultimate decision in allocation of resources. Whereas the planned economy is one in which the coordination of economic activity so essential to the viability and functioning of a complex social economy is undertaken through administrative means commands, directives, targets and regulations rather than by market mechanism. The dictionary.com defined this economic system as a socialist economic system in which production and distribution of goods and services are controlled by the government and industry is mostly publicly owned. Provision of public goods These are goods that are non rivalry in consumption and non excludability as alluded by Stanlake (2000) He also added...
Words: 1296 - Pages: 6
...Concept of Free Market Economy with focus to Indian Economy and options for Bangladesh 1 1.0 INTRODUCTION Free market economy has become the only economic system dominating the world after the collapse of socialism in Soviet Union and other East European countries. Today, the application of market mechanism is widespread all over the world. The free flow of capital and goods throughout the world has made the world like a single village. Success of countries practicing free market is only evident with the growth of the USA, the Scandinavian countries, Germany and France as major world powers. Countries such as India and China, by allowing liberalization of its trade to some extent and practicing free market principles brought about more efficiency among its domestic producers and increased its growth rate markedly. Free market existing with the doctrines of Socialism like limited regulation of prices by the government to protect the poor can be an ideal situation for developing countries like India, China and South East Asian countries to attain growth and prosperity. 2.0 FREE MARKET ECONOMY The term free market economy primarily means a system where the buyers and sellers are solely responsible for the choices they make. In a way, free market gives the absolute power to prices to determine the allocation and distribution of goods and services. These prices, in turn, are fixed by the forces of supply and demand of a respective commodity. In cases of demand falling short...
Words: 3081 - Pages: 13
...Explain how a free market economy solves the 3 basic economic problems Free market economy is a system where every individual can function and operate free as a consumer or producer. The free market economy can be used to solve the 3 basic economic problems which is what to produce?, how to produce?, and for whom to produce. What to produce depends on three factors which is profit motive, price system and consumer sovereignty. Competition among producers will force the producer to come up with newer and more innovative ideas. Price mechanism will help to relocate resources efficiently whereby goods and services will be produce to satisfy unlimited human wants. Price | Demand(D) | Supply(S) | 1 | 10 | 2 | 2 | 8 | 4 | 3 | 6 | 6 | 4 | 4 | 8 | 5 | 2 | 10 | Equilibrium point Equilibrium point Price Mechanism diagram How to produce refers to the method of production which is using a cheaper method, using a new method of production by using high technology and labour intensive or capital intensive. Competition between producers improves efficiency and producer will try to cut down cost to get higher profit. For whom to produce is the third economic decision as towho will be receiving goods and services in the free market economy system is answered through the price system is answered through the price system. Goods and services are obtained by anyone who can afford them. Goods and services are distributed among the residents of the...
Words: 259 - Pages: 2
...MSc Development Studies Perspectives of Development Presentation Assignment: The Free-market Theory/The Free Enterprise Theory/Economic Liberalism Key Words: Laissez faire, Adam Smith’s ‘invisible hand’, liberalism, supply and demand, nationalization, privatization, deregulation, rational choice liberalism, neo-liberalism Between 1970 and the last decade before the millennium, there took place a remarkable and dramatic change in the attitude towards the role of the state in economic activities. According to Shutt (1998), during the late 1950 and 60’s, there developed a near consensus among economists especially those linked to the Chicago School of Thought that laissez-faire capitalism was the dominant economic system and that deviation from it was untenable and unsustainable. The argument was that in order to achieve a modicum of development all countries must dedicate themselves to establishing fully liberalized economic, political and cultural systems in which the state plays a minimal role or simply put that of an adjudicator. The rise in what came to be popularly known as the free market economy owed/s much to the failure of the economic models based on extensive state intervention (this was particularly so after the Second World War) to deliver adequate levels of prosperity or security as was signified following the fall of the Soviet Union. As will be argued in this paper using theories from Peter Berger (1985) and Hernando De Soto this apparent logic...
Words: 2759 - Pages: 12
...method of producing and distributing largely depends on the country’s historical experience, form of government, objectives and ideologies. To some people, government intervention in the economy are consider significant to protect against the worst elements of capitalism while others thing that such regulations are unnecessary invasions of their freedoms. To what extend should the government get involve in the economy. The government should take a limited role in the economy while allowing private enterprises because such involvement would eliminate the negative aspects of capitalism while adopting the positiveness of Socialism. This would benefits the economy in variety of ways. Firstly, government regulations allow businesses to remain in the private hands while removing some of the worst abuses of pure capitalism. Secondly, a government intervention protects the consumers, producers, and the community as a whole. Finally, limited government involvement prevents crises such as inflation, unemployment and depression. The nineteenth century period was a memorable period in the history of human kind. The industrial Revolution transformed society from an agricultural to a mechanized society. He output of production increased enormously thus creating substantial amount of jobs. Although the economy was drastically affected by the increasing industrialization; many people were horrified at the evils of the Industrial Revolution. It was this period of time when new ideas and philosophies...
Words: 1027 - Pages: 5
...International Political Economy International Political Economy is a collection of aspects from economics, political science, sociology, history and some philosophy. With information coming from multiple sources there are bound to be numerous different perspectives of IPE. The three most common and well known perspectives examined will be liberalism, mercantilism and historical structuralism. Being that these are the three most accepted perspectives suggests that the majority of the views within these theories are strengths. However, with so much information, there are bound to be weaknesses and flaws found within these theories as well. There are always ways to improve on these the weaknesses and theories in general. International Political Economy deals with three main approaches: liberalism, historical structuralism and mercantilism. Each theory has its own strengths and weaknesses, but the way to improve them all is not to fix each individual weakness but to combine the strengths of all the perspectives into to create an entirely new theory. Liberalism is often described as the IPE perspective that focuses on the individual and the primacy of freedom or liberty in the book “Introduction to International Political Economy” by David Balaam and Michael Veseth. Individual freedom and capitalism are the overarching ideas found within the idea of liberalism. Capitalism is commonly referred to as a market-based economic system where free-markets and competition are the governing...
Words: 2799 - Pages: 12
...of underdevelopment to be due to the predatory behavior of the developed world. The neoliberal school of thought redefined underdevelopment instead to be a result of poor allocation of resources brought about by the distortionary price controls and regulations used as tools of state intervention. It posited that too much state involvement in the economy is at the root of slow economic growth. The fundamental assumption in this perspective is that an unregulated market performs better than one with government regulation. It is convinced that although markets also run the risk of failing; market failure is much less costly than government failure. Where the dependency theorists advocated the reform in the international economic system, the counterrevolution thinkers insist that the speedy solution is the promotion of free markets that are supported by permissive governments that allow the market to perform its self-regulating functions. The prescription of the neoliberals to stimulate economic growth include not only the promotion of competitive free markets but also the privatization of state-owned enterprises, the promotion of free trade, the expansion of trade through advancement in exports and the well reception of investors, and the elimination of government regulations on prices. Commanding Heights: Battle of Ideas puts together the arguments of the neoliberal school of thought as it emerged and influenced economic policy in the 20th century. The documentary particularly...
Words: 749 - Pages: 3
...which the tole of the state is significantly reduced in matters such as public services and the economy, Thatcher desired a free market and a privatised economy. Thatcher was also a firm believer in independence and individualism, this lead to a desire for self-reliant people who provide for their family and are responsible for their own well being. Since this time Conservatism has changed, especially since the appointment of David Cameron MP as their leader and eventually Prime minister. The party has moved away from right wing and is instead now more centred on more liberal policies, This is down to the desire of Cameron for moderation. In this constantly changing society this modernisation is essential for any party that wishes to stay in power. Many policies remain intact from the Thatcher years such as the economy, but many have also changed like foreign policy and socially. Thatcherism demanded a market that was a a free and flexible as possible, a deregulated economy. In 1979 Thatcher shifted the country towards a speculative market economy rather than a manufacturing based economy. An economy in which utilities and industries should not be funded by government or financially assisted. In the thatcher years many sectors of the economy were privatised such as energy suppliers, telecommunications and transport services. This would lead to an increase in the efficiency of the economy due to a massive rise in competitiveness which has stemmed from everyone starting from a level...
Words: 331 - Pages: 2
...Non-profit organizations play a key role in the world’s economy. Organizations like Opportunity International assists people in developing countries give back to the community. In the 25 years of the company, Opportunity International has assisted over one million people in 28 different countries. Developing countries do not have financial institutions such as banks where the under privileged can receive loans to start an entrepreneurship. That is where organizations like Opportunity International comes into play. These people, who are mostly women, that take advantage of Opportunity International, receive microloans so they can start and invest in a business. Even though microloans maybe only 100 to 200 dollars, a small amount to someone in a developed country, can make a huge difference to a village in an under-developed country. By having investors, the community grows and prospers from that one investment. This also includes the investors themselves. This provides the investors with opportunities for growth as an individual as well as providing employment for the community. For example, Pamela took advantage of the services offered by Opportunity International. She used the training to start a small mushroom business. She employed three people to assist in the business, which in return provided profit to feed her family, send her husband to school, and support her community. As they explained in the video, Pamela was another person in an underdeveloped country...
Words: 594 - Pages: 3
...Different Results. Jorgen J. Ramirez Miami Dade College Professor Valdes Principles of Macroeconomics Different Economic Models, Different Results. Believe or not, each person is free to decide which economic model is the most suitable for its company or business; well, the same idea applies for countries. Each country has the freedom to choose whichever economic model is going to be their guidance for its economic development. Choosing between 3 options sounds easy, but it is not easy. Capitalism, socialism, and finally mixed economics are the three basic economics models that have been around the world since the beginning of the economics’ studies. Each one of the models listed before are different one from another; they are opposite ideas, so their results after practicing them are very different. According to the Scottish philosopher Adam Smith, considered “The father of Economics”, the capitalism is the best way to increase the economic efficiency in any country. Adam Smith (1776) The Wealth of Nations that “free market economy produces more wealth, and more benefits to society, than other systems.” He argued that the competition between different people is the key to create a successful capitalism. The pursue of people’s individual interests makes possible the creation of a free market. Everybody wins, the costumers and the owners wins. Capitalism works very simple, companies and businesses have to address the needs of the society, but also they have to set affordable...
Words: 982 - Pages: 4
...Patrick Moyes Economics for Global Decision Makers Week 2 Dr. Barbara-Leigh Tonelli February 12, 2013 Introduction: Economic freedom is defined as the basic right of all people to act freely in how they work, what they produce, what they consume, and how they invest their time and money. It is “an essential aspect of human liberty, without which a person’s rights to life, liberty, and the pursuit of happiness may be fundamentally compromised” (Miller, Kim, 2013). Economist/philosopher Friedrich A. Hayek stated that economic freedom is the “prerequisite of any other freedom” (Miller, Kim, 2013). Economic freedom, or lack thereof, is experienced in different levels throughout the world, depending on the degree to which governments restrain them in their countries. The Index of Economic Freedom, created 1995 by The Wall Street Journal and The Heritage Foundation, ranks the economic freedom of every country and reports year to year how the levels have changed. This paper will focus on the relationship between economic freedom and variations in wealth among countries, and will describe specifically how one country from the index has changed over the past 5 – 10 years. The Relationship between Economic Freedom and Variations in Wealth: According to the Index of Economic Freedom, researchers have established that economic freedom is directly associated with economic growth and prosperity (Mitchell, 2013). The wealthiest countries in the world, based on per capita GDP...
Words: 1526 - Pages: 7
...1 Introduction Over 70,000 Russian-state owned enterprises were privatized in 1992. A substantial number of the private buyers were from the United States and Western Europe. The reason that drove this “government” decision was to move from a centrally planned economy to a market system. A weakening economy in the late 1990s made the government move back towards state owned enterprise. Prospects of deprivatization have on investment by managers of privatized firms The prospect of deprivatization of private enterprise will likely impact the privatized managers. The fear of losing their position will likely alter their behavior, and affect the manner in which they make decisions or choices. It is possible that “unhappy” managers may be; less productive. Effects of deprivatization on foreign investments in Russia Foreign investors may be hesitant to invest in Russia because deprivatization will revert back all property rights to the state, and in central planning government decides how to use its resources. Property rights therefore are not assigned to a specific person, nor can those rights be transferred; they are not alienable. This is opposed as to what occurs in a free market whereby private enterprises decide on how to use resources. In a privatized setting, the property rights that are owned by the firm are assigned to a specific person(s) and can be transferred, as in sale of the firm and its assets; property rights are alienable. A...
Words: 660 - Pages: 3
...a liberal is general regarded as one who believes in an active role for the state in society such as helping the poor and funding programs to address social problems. For economic liberals (also referred to as neoliberals and sometimes as neocon1 the state should play a limited, knot constricted, role in the economy and society. In other relatives ), words, today's economic liberals have much in common with people who are usually referred to as ''conservatives'' in the United States and many other countries. ROOTS OF THE ECONOMIC LIBERAL The liberal perspective today reveals many insights about political economy that mercantilists miss or do not address. Although liberals believe that people are fundamentally self-interested, they do not see this as a disadvantage because broad areas of society are set up in such a way that competing interests can engage one another. Today's economic liberalism is rooted in reactions to important trends and events in Europe in the seventeenth and eighteenth centuries. Fratxois Quesnay (1694-1774) led a group of French philosophers called the Physiocrats or Qs economist's. Quesnay condemned government interference in the market, holding that, with few exceptions, it brought harm to society. PERSPECTIVE For the laissez-faire world of individual initiative, private ownership, and limited government interfere fears and loathing, however, are directed toward very different sorts of states. For Smith, the individual freedom of the marketplace...
Words: 2486 - Pages: 10
...- emancipation from one's fears, his inadequacies, from prejudice, from discrimination, from poverty. That could not be further from the truth in the world of economy. Collaboration and agreements among countries are very important in today’s world development. Economies that have remained closed from the rest of the world have not been able to attain and sustain growth. Many developing countries have gained competitive advantages and growth by implementing open market and trade liberalization. Only through liberalism can economic potential be unleashed. Trace back to origin of liberalism, the Italian merchants wanted more freedom and rights and encouraged free trade in order to move towards a more liberal, innovative system. We will show you that free trade and innovation are the only viable and compatible models for development. We will also show that inevitably the world is moving towards embracing the liberal model. South Korea and Chile are two countries that transformed their economies from the poorest to the one of the best performers. They were both politically ruled under authoritarian regime but later on they all adopted liberal economy. In South Korea, post economic reform, their economy went to another level. GDP hits $1 trillion in 2007. South Korea is one of the fastest growing economies in the world, a huge contrast to its northern neighbor. In Chile poverty was reduced to half post the reform. It’s the first nation in South America to win membership...
Words: 910 - Pages: 4
