why do some people believe that MARKET SYSTEM is the best mechanism for allocating scarce resources and thereby encouraging a positive "Investment Climate"?
2007-05-01 05:28:44 · 7 answers · asked by Smoke it 1 in Social Science ➔ Economics
The reason is simple. IT is the Truth. All other methods of allocation of resources is simple cheatting of one by the other. The market system was not developed by any Govt. or Leader or Philosopher. It developed because the people needed markets for exchanging goods at free will and choice. It is not surprising that the people who want to take the power of allocation of resources in their hands (like politicians, bureacracy, socialists, govts.) and ensure that they become rich will try to propogate that they are best allocator of resouces. And, some people continue to belief these dishonest, self-seeking corrupt people whose profitable commercial business is dependent on curbibg and controlling market system. The countries like Soviet Russia, China failed to deliver the results to the people by killing/ controlling markets and then changed to adopt market system. India experimented with market control and Statedetermined resource control to take India to complete bankruptcy and highest poverty by 1990. When there was no option, they gave up in some ares and markets came up. Better resource allocation by markets since then delivered higher rate of economic growth and lowering of poverty at a faster pace. It could have been better if the Govt. gives up control over many more matkets in India and aloow the market system to function without govt. ineterference. But the Govt. and politicians will not do this. They will say that they want to ensure growth and justice. Actually they do not want to lose the benefits they enjoy by controlling even if it means both grwoth and justice to people are adversely affected.
2007-05-01 06:19:37 · answer #1 · answered by sensekonomikx 7 · 2⤊ 0⤋
be.sane is correct - his answer is the best so far. I will only add a little. I was walking through the downtown of a mid size city and stopped and watched two men installing a rubber seal between the brick pavers and the curb. This seal would stop the water from getting down under the brick pavers and freezing in the winter time, thus pushing the pavers out of place.
It is then that I realized that a planned centralized economy could not have planned 5 years ahead (so much for the Russian 5 year plan) for the need for rubber sealer to go between the pavers and the curb. It is only when the need arises and a person goes out to solve the need that growth and vibrancy occurs. In fact a planned economy could not plan for all the minutia of things that we need daily.
Last point, a planned or controlled economy would have decided that my father-in-law was worthless when at age 67 he retired. He didn't think he was, so he started his own business that met the needs of some larger companies. He suddenly because an entrepreneur, put it all on the line, and won. I have never seen a person go from being old to vibrant so quick. That's the market system - not communism or socialism or any other planned controlled economy.
2007-05-01 14:38:33 · answer #2 · answered by Remember Back 3 · 0⤊ 0⤋
How would you measure "best mechanism for allocating scarce resources"?
I'd measure it by how effectively it gives everyone what they need and want. Using that definition, it'd be tough to argue that any other system works better.
Ronald Reagan once said, "All societies are capitalist, the difference is in who controls the capital." When someone else dictates what you can have, you usually don't get what you want. If you don't believe me, put someone in the government in charge of your vacation plans this year and see how well you fare.
2007-05-01 17:36:42 · answer #3 · answered by ZepOne 4 · 0⤊ 0⤋
With the market system transaction are made to those with a want. Things cannot be given away therefore a market in a sense is the most practical way of allocating resources. For example; there is a scare resource cheese and there are unlimited wants/needs for cheese. Money is a medium of transaction to get cheese in a way to choose who GETS the cheese and how cheese is allocated by simply paying for it.
2007-05-01 12:34:16 · answer #4 · answered by cynic 3 · 0⤊ 0⤋
In markets, decisions are made by people who have knowledge of "time and place", that is people with the motivation to invest and make available what people want to buy now where they are, and buyers who know what they want. No distant third party central planner can hope to do as well.
2007-05-01 13:45:10 · answer #5 · answered by meg 7 · 0⤊ 0⤋
That is just the law of supply and demand and it's been around as long as mankind has been around.
2007-05-01 12:32:21 · answer #6 · answered by Anonymous · 0⤊ 0⤋
Give me another that works.
2007-05-01 12:33:37 · answer #7 · answered by Anonymous · 0⤊ 0⤋