Posted by Mitch on August 22, 19103 at 21:38:40:
In Reply to: Re: Free Market Economy posted by herman on July 13, 19103 at 02:23:04:
Advs.
Free market economy is highly compettitive, and will therefore drive down prices and increase economic efficiency. It will also provide those who are willing to take risks (entreepreneurs) with higher incentives. It will increase the inequality of wealth distribution, but this can be viewed as either good or bad.
Disadvs.
Provision of public goods and services may be neglected, as people will not wantt to chip in as there will always be a 'free rider'who will not pay for the good/service but will reap the benefit(e.g Lighthouse: two shipping companies might fund the production of a lighthouse, but all shipping companies will benefit from it).
Environmental disadvantages will be high as oligopolies may tend to undergo price wars, and in order to keep costs low, pollute the atmosphere. Economic activity would be unstable, the business cycle wouyld have more violent up and down turns.