Free Market Institutions - Essay Example

Production is decided by supply and demand. In a socialist economy the government or a committee decides they would like more butter or more shoes produced in the current year and choose a quantity for production that they believe will be sufficient (it rarely is—or it is far too much).

Consumers are sovereign in so far as in a market economy their demand decides what products are produced. Businesses decide what to produce based on their reading of consumer demand. Businesses fail when they have not properly estimated the demand for their product. Consumers are sovereign. 

Consumers and businesses determine desire. Businesses can generate desire via advertising, novelty, and innovation.  

Savvy consumers could be said to be more sovereign. Consumers who refuse to succumb to advertising or externally generated desire. 

I would choose a market-driven business. 

Healthcare and debt servicing.

National defense – this is too important to outsource to the market; Some health care such as Medicare and Medicaid. Maintaining national parks. Taking taxes. The Federal Reserve system centrally plans monetary policy. Stimulus spending in times of recession.