Businesses all over the world have different types of limitations depending on the type of market the country has. These different types of systems include market, command, traditional, or mixed economies. In these different places all over the world, it is very hard to be just one type of system; because it all depends on what boundaries the country wants to have on its people, businesses, and market.
One of the major players throughout history that developed one of the most influential markets nowadays is Adam Smith. He explained the capitalistic theory through the novel “The Wealth of Nations”. The book explains how profits can be used to get more employers, therefore a larger production and so on, increasing the collective wealth and prosperity of the nation. Even though the novel portrays greed as good, it shows how if one becomes richer it can benefit everyone not only oneself. Through this, one can see how capitalism just began as a theory of how the economy functions; promoting the idea that reinvesting profits in production leads to faster economic growth. Later on, this theory was developed into a market principle that encompasses ethics, ways of thinking, and how industries should work.
In a Market Economy, individuals may own and operate the factors of production which is decided upon the levels of supply and demand. This type of market, also called capitalism, attempts to have a system that has no or few government restrictions. This freedom in free enterprise gives people the opportunity to manage their own businesses and companies. Along the lines of capitalism, free enterprise encompasses private businesses that operate in competition free of state control. Even though capitalism and free enterprise are often seen as the same thing, they are closely related but still different. One can have a capitalistic economy with a completely free enterprise but one can’t have a free market without capitalism. Generally, any economy is capitalist as long as private individuals control factors of production, unlike other systems.
Command economies are economic systems in which the government owns and operates the factors of production. In these types of places, few choices are given to individuals because prices and operations are decided upon what the government thinks is proper. Associated terms to this may include commonly known terms such as socialism and communism. Examples of this type of economy include places such as Cuba, North Korea, and other countries where there is more government control.
Traditional economies are rarely seen nowadays. These types of systems are based upon a very different ideal than the others today. Traditional economies occur in Agrarian cities that are not industrialized. Because of this, it is based purely on customs and traditions that have been going on in a specific place for long periods of time. Usually focused on agriculture and hunting, these places tend to focus a lot more on the recollection of raw resources that they can hand over to factories. Societies like these described, include small places like Ohad, Haiti, Rwanda, etc.
When describing these markets, there are no pure markets or command economies. This is because there is some type of government involvement in most places around the world, even in major places that are characterized by the lack of it. The United States is characterized by free enterprise and a capitalistic market, but the market is not as free as it seems. Many aspects of the United States businesses are regulated by government involvement such as minimum wages, social security, and regulatory policies. But even though it seems like it is unnecessary, the country is trying to prevent and limit market failure while balancing the levels of supply and demand. This not only helps the economy overall but helps the individuals in the market.
Another example of a mixed economy is China. The government there has a tight hold on business in different factors of production and prices; however, private ownership is still allowed. As seen, both the United States and China can be considered mixed economies because of their characteristics containing different types of markets. Overall, there are three different types of markets, but neither are pure versions of each other. Economies nowadays are very complex and are tailored to the individual choices of the governing bodies of a place. Therefore, the most common types of economies are mixed which help individuals and their countries overall.
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