These economies urge
depending on what kind of authority each country has. Whether it’s a
dictatorship or communist government or even a capitalist country, each one of
these has different ways to manage their economic resources due to what each
country think is better for their society. Each one of these consists on
answering the questions for the economic problem which are: the first, what
should be produced and in what quantities? The second question is how should
things be produced (what materials should be used)? The third question who
should things be produced for (people that can afford it or as a ‘fair’
manner)? Not taking into account which country uses what economy, both of these
have to find a way to approach a way to answer these questions.
A planned economy, in
other words, a centrally planned economy or a command economy, lies on the fact
that the government has total control over the allocation of resources. A planned
economy denies the use of private companies and allows the government to
determine what each factory produces, levels the prices, distribution and wages
according to the best interest of their people planned economies gives the authority
control over every resource (factors of production) the country has in or on
its land. Planned economies can lack the growth and development of the country
if the government does not allocate resources to refresh or administrate enterprises
in the correct manner, thus the fact that it can provide stability for the
country.
A free market economy
has a self-righting system where there is no economic intervention and regulation
by the government. The economic problem is handled by private enterprises
alone. Advocates of free market traditionally consider the term to imply that
the means of production is under private, not state control as well. All resources
(factors of production) are privately owned; therefor the forces of ‘demand and
supply’ dictate production type and levels prices and wages. Individual choices
and the like hood of profit lead producers to choose an adequate allocation of
resources, but when a demand changes, there should theoretically be a
transition period in which resources are not allocated efficiently, until
supply has shifted fully to meet the market’s needs.
In reality all
economies are mixed, these have varying degrees of free market and planned
economic characteristics. Countries such as china have a higher proportion of
planned input, compared to countries such as United States and Colombia. For example,
coffee in Colombia, a few years ago they wouldn’t let Starbucks coffee enter the country and establish a competition for
the national brand Juan Valdez Café because
it would lead to an economic decrease in the country’s coffee percentage; now
in the next 5 years there will be at least fifty Starbucks coffee in Colombia, this happened because of the new deal
the Colombian government closed for “TLC” meaning a free market trade.
In my opinion I think
that all economies should be mixed but it should lead shift towards a free
market economy. An individual should be able to have the power of choice and opportunity
of cost, the country’s economy will increase because of the taxes, these should
be higher for International brands that national ones although they should have
a tax percentage too. Free market economies should also be empowered by the
government because these are always willing to accept what’s in the best
interest of their people, while private companies benefit more when the company’s
incomes increase meaning the average lifestyle will decrease if the government doesn’t
earn any profit.
In conclusion mixed economies are always best with a free
market intervention in the middle, this way, the incomes of the government increase
as well as the private enterprises revenue.
