Free-market economy

the free-market economy designates arbeitsteilig and capitalistically organized economic system, whose most important aspect is meeting supply and demand on free markets.

The free-market economy defines itself thereby of the Subsistenzwirtschaft, with that production only directly forthe own need and not for the purpose of the exchange takes place.

For a highly developed free-market economy a functioning article of exchange ( money ) is elementary, which the indirect exchange of goods and services (commodity against money, money against other commodity) opposite onesimple bartering (commodity against other commodity) only makes possible.

In contrast both to the planned economy and to the central administration economy each restaurant economics plans in principle for itself in the pure free-market economy. Production such as consumption are steered thereby via the market. The free Marktzugangfor consumers and producers an efficient Allokation (distribution) of goods and resources makes possible by competition and free price formation. It is contentious whether this leads also to an optimal Allokation of the factors of production.

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history of the free-market economy

in the Middle Ages had itself at the edge of an agrarian Naturalwirtschaft an efficient, regionally aligned free-market economydeveloped. The exchange of the products manufactured by craftsmen took place on by bodies (guilds, advice etc.) organized and by personal relations a coined/shaped market. These bodies” planned “the size of the market, by limiting the number of the producers strictly. So should an equilibrium by production and Konsumation to be ensured. This regularization referred also to the production methods, tools and their technical innovation. In this adjusted free-market economy there was no place for competition.

The today's capitalistic form of the free-market economy developed between that16. and 18. Century. In the absolutism a modern territorial state developed , for whose bureaucratic and military needs an expansion of the money economy became necessary. In the foreign trade the surpluses of money necessary for the central state should be gained. The mercantilism triedto dissolve therefore the local markets for the developing world market, adjusted strongly by guilds. Increasingly were subjected the craftsmen and Kleinbauern of the anonymous competition of supraregional, world-wide markets producing for local markets.

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forms of the free-market economy

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Only supply

and demand the economic activities determine free free-market economy with the free free-market economy, whose principle was described by Adam Smith (1723-1790). Smith went out with the people picture of in such a way specified homo oeconomicus , after each humans only its use pursued. Those invisible hand of the market would let a use for the social whole and a reconciliation develop from it between limited goods of one vertern and boundless needs.

Smith justified this restaurant economics as follows:

  1. Everyone is to have the liberty to create even enterprises.
  2. These enterprises are useful both to the founder, since it can increase its private property, and the economy, since the product of the respective enterprise can be used, and work is created.
  3. The price of the product is fair, because it by offer and Demand is steered and thus to a stable economy contributes.
  4. The mutual competition of the different entrepreneurs, contributes to the improvement of the price performance ratio and the quality.
  5. In order to sell its own product better, the entrepreneur will try automatically, his production tooimprove. The economy is advanced in such a way.

Social and/or national interferences, with which supply and demand certain rules are subjected, do not take place. The free free-market economy exists in its pure form only in the theory.

As the further basis for thatModel of the free free-market economy applies the theory of rational acting of max of webers. For the actions of humans is appropriate excluding a purpose central calculation at the basis

characteristics of the free free-market economy are:

  • Freedom of contract
  • freedom of trade
  • free occupation choice
  • private property at means of production
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social free-market economy

For the demarcation of a social responsible person form of the free-market economy of its pure development the term social free-market economy was coined/shaped 1947 by the economist Alfred Mueller Armack. The economic system of the Federal Republic is assigned to this term.

The social free-market economy (sometimes also as counterpart to Manchester capitalismthe 19ten of century „Rheini capitalism “mentioned) into the 1950er years under Konrad the Adenauers' government was sketched by the first Federal Minister for Economic Affairs Ludwig Erhard as alternative to socialism demanded of the SPD.

Mental fathers of the idea were Franz Oppenheimerand after the Second World War walter Eucken, Franz Böhm, Alfred Mueller Armack as well as Ludwig Erhard (see also Ordoliberalismus). As forerunners of the social free-market economy are called: Karl von Vogelsang (1818 - 1890) has as one of the most important social reformers that Period of promoterism the Christian social teachings coined/shaped. Beginnings of the social free-market economy decrease/go back to the Kathedersozialismus (see association for Socialpolitik and historical school). Substantial names are particularly Adolph Wagner , Gustav of Schmoller and Lujo Brentano, as well as outside of this directTradition William Röpke.

Erhard assumed - completely in the sense Franz Oppenheimers - a really free free-market economy would be always also social. So that a free-market economy is really free, it must be free of concentrations of power and entrance hurdles, the oneoppose unhindered economic manipulation of the particular. If everyone, which wants to take goods of the market, succeeds in, offering by own productive activity of exchange values then the maximum of the possible prosperity is reached. To that extent Erhard Adam Smith and the political economist closes 19. Century on, which expected an increase of the productive motivation from eigennützingen acting of the free individual. However an economic system must ensure that the supremacy of particulars does not obstruct the productivity of the many. The term social free-market economy designates inthe view Erhard a free-market economy with implemented system rules, which acting the particular directs into such courses that the overall system brings automatically social results out with maximally possible liberty.

Erhard had within and outside of its own party, the CDU, for many years forthe conversion of the idea of a nationally not steered Allokation of goods and services fight - although at first long not all prices were released at one time. With the law against restraint of trade, at the 1. January 1958 into force stepped, becamein Germany a central demand of the social free-market economy converted. Important steps in Austria were for example trust prohibitions and laws against mean competition.

Around 1960 was the first violent criticism at the social free-market economy triumphs. The free-market economy had its efficiency under proofposed, and the foreign exchange „prosperity for all “of minister of economics Ludwig Erhard seemed to be no more utopia: The enormous economic growth of the fifties made at the same time the integration of the refugees, refugees of homeland and Danube swabia and the development for the social politics possible. Nevertheless meant end 1963 over 62% of the Germans, it would go to them „for the moment best “.

While the practice of the social free-market economy is to a large extent undisputed in Germany and found with the welfare state warranty their precipitation in the Basic Law, serious differences exist in the interpretationof term and objective of a in such a way designated restaurant form. Repeated for example the old controversy between monetaryists and Keynesianern breaks and finds its precipitation also in the appointment or Nichtberufung of economics Wissenschaftern open into the circles of the restaurant ways in such a way specified.

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Josef Riegler

and other around 1986 the term ökosoziale free-market economy coined/shaped ecological free-market economy under integration of environmental protection - still little common, but in its contents than guideline recognition. By ecological free-market economy a social free-market economy is understood,by nationally normative policy the environmental goods to virtual goods become leave and thus make tradable. e.g. the emission trade is a form of the ecological free-market economy.

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further one forms

in addition gave it other forms like the socialist free-market economy. Itbecome also free-market economy models without capitalistic influences, like e.g. in the free economy, publicises.

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criticism

the theoretical basis for the free free-market economy with the picture of „the invisible hand of the market, developed by Smith, “, outthe best for the general prosperity for the egoistic actions of the particular would automatically produce, one doubts. Smiths theory is a model and thus an incomplete illustration of the reality. Also the sociologist max of webers confessed critically that his theory of therational acting a model is, which can represent the reality only shortened.

As main points of criticism are stated:

  • The free-market economy can lead to trusts and monopoly formations. These competition restrictions prevent those idealizing accepted perfect resource allocation. As counter measures install States of supervisory authorities and issue Restrictive trade practice acts (see also: Ordoliberalismus).
  • Only products and offers are developed, which promise a profit. Among them suffer for example the research: Patients concerned by a rare illness do not form a lucrative market, therefore be omitted the research for development more particularlyMedicines. Also different, usually small and very much diversified industries, like Web radios or model railways, suffered from it.
  • external factors, for example dirty air, do not flow into the free market price system. Goods, which damage the environment, are too cheaply produced therefore.The free free-market economy does not offer incentives for the protection of the environment.
  • The efficiency is reduced by unproductive work, which results in the competition, for power measurement and financing as well as for satisfaction „artificially “ by advertisement of produced needs.

One speaks in this connection of Market failure. The major task of a state is it now to prevent market failure. If this does not succeed in the desired measure, then one speaks of state failure.

Already Jeremy Bentham and its successors recognized such restrictions. The actually liberally adjusted UtilitaristBentham developed felicific the calculus for social reasons. This philosophy is based on the basis the fact that the largest property which can be reached would be that, which leads to „the greatest possible luck for the greatest possible number “(greatest happiness for the greatest NUMBERs).The social reformer in line with standard usage however later the second principle to greatest happiness principle .

From Marxist view the free-market economy, also the social free-market economy, serves primarily the capital interests of a minority in the population.

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see also

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literature

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