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Market Economy

Socialist Market Economic system (Encyclopedia)

Labour intensive: Uses a relatively high number of employees compared with the amount of capital used. It follows that if we find a case during which increased savings do not cause any appreciable fall in the fee of interest this indicates that the capital market has its suspicions—which may turn into totally unjustified—in regards to the permanent character of this sudden enhance in the demand for securities.

If due to this fact in a despair we find the long-term fee of interest remaining relatively inflexible this indicates that, rightly or wrongly, the capital market believes in the continued existence of investment opportunities yielding marginal profit at the former stage, investment opportunities which the despair could have obscured but which it has not obliterated.

It is indeed fairly obvious that in a dynamic economic system with fast technical progress and extensive and frequent earnings fluctuations all expectations primarily based on the prevalence of long-run developments should be of a somewhat problematical character, but to our present downside this is strictly irrelevant.

Finally, the market economic system leads to periodic economic crises, where all these disadvantages develop to a degree that many of the advantages I mentioned earlier simply dry up —the economic system stops growing, fewer things are made, growth of the forces of production slows down, investment drops off, and so forth.

It simply is unnecessary to continue arguing that we must give priority to the benefits of the market when they are in the strategy of disappearing. For empirical evidence, just have a look at how rapidly and how totally China fell victim to all the disadvantages of the market once it set out to avail itself of the market’s advantages. Market economic system has several advantages Having a healthy competition and a system that encourages entrepreneurship is necessary in any market.