Free Market Economy Essay

952 words - 4 pages

The United States is known to operate in a free market economy. In other words, the economy is based solely on supply and demand with little to no government control. In reality, however, the United States has various government regulations on our country’s market. The amount of regulation that is necessary is a continuing debate among politicians and economists to this day. Some would say that the key to a successful market economy is to remove government restrictions in order to force businesses to provide superior products and services at affordable prices. Yet, others assert that government regulations are essential in protecting consumers, stemming from the assumption that corporations ...view middle of the document...

Another example is with U.S. Airlines in 1979. This gave consumers more choice of airline companies and lower airfares.
If the market were to be regulated, it would also have various drawbacks. For one, if there is too much regulation then it could create a huge government bureaucracy that will suppress growth of the economy. Government involvement would also discourage innovation, seeing that companies are forbidden to market their products in certain ways, in certain places, and other regulations. Because of these parameters, it could also create huge monopolies that cause customers to pay higher prices for their goods. Along with monopolies, there would be various tariffs on imported goods that would cause a large shift in the supply curve, thus making consumers pay a greater price for their goods.

Additionally, historical examples attest to the failure of a regulated economy. The coal industry is a prime model of a regulatory failure, since the coal industry has so many regulations that it is less profitable to sell coal domestically than it is to ship it overseas. Similarly, many companies decided that after the Sarbanes-Oxley Act of 2002 that it was too inconvenient to list in the United States, so they released their IPO’s on the London Stock Exchange where there were fewer regulations.
Disadvantages of a Free Market Economy
It is clear that having a free market economy has its advantages, yet having a government regulated economy can also be beneficial. Regulation is designed to manage the behavior of companies and people associated whom to not practice fairness within the business. In the United States, both the market economy and the government play important roles. The main goal and advantage of the controlled state is the protection and safety that it provides for consumers and environment. Without guidelines for companies to follow, they have free reign and have the ability to endanger...

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