Glamor Economics

Chapter 53

Chapter 7 Section 7 The government and the market, not one less - Mixed economy

There is always a contradiction between the scarcity of resources and the infinity of demand in human society. Therefore, it is necessary to choose a certain mechanism to effectively allocate limited resources so that it can not only ensure efficiency but also take into account fairness. The problem that must be faced, and the government and the market as the main body of resource allocation have also become a core proposition of economics.

Since classical economics, there have been two different views on the way of resource allocation.

One view is that the market mechanism can allocate resources rationally and effectively under certain conditions of social resources, while the direct intervention of the government is harmful and may fail.This view comes from Adam?Smith.The economic thinking centered on the "invisible hand" believes that the market itself can effectively allocate resources, believes in the role of the "invisible hand" of the market, and believes that efficient institutional arrangements are the result of the interaction of various market factors. Rather than from the purposeful design of the government.The government that manages the least is the best government, and the government should "govern by doing nothing".

Another point of view is that the market mechanism has limitations, and the market may also fail. It is believed that in the process of resource allocation, the effect of the market mechanism has relatively large limitations, which may not only cause unreasonable resource allocation, but also cause resource allocation. While fully utilizing and realizing wealth growth, social fairness is lost. It is advocated to replace the market mechanism with the planning mechanism, and the "visible hand" of government intervention should be introduced to realize the effective allocation of resources.

With the development of economics itself and the development of society, there are fewer and fewer economists who advocate the extreme use of market mechanism or planning mechanism.Because market allocation and planned allocation are two basic ways of resource allocation, there are not only differences in the cost of resource allocation, but also the market and the government as the main body of resource allocation may fail.The government's possible failure requires market correction, and the market's possible failure requires government correction. The market utility and government utility are integrated and complementary.

[links to related words]

Mixed economy The actual economic system is in a sense a mixture of a completely free economy and a planned economy, that is, a mixed economy.A mixed economy refers to an economy that has both market regulation and government intervention.In this economic system, the decision-making structure has both decentralized and centralized features; correspondingly, the motivation and incentive mechanism of decision-makers can be economical, or they can passively accept instructions from superiors; information in the entire economic system Delivery is also done through both price and plan.

Macro-control The regulation and control of the national economy by the state is a necessary condition to ensure the coordinated development of social reproduction, and it is also an important function of economic management in a socialist state.In China, the main tasks of macro-control are: to maintain the balance of the total economic output, curb inflation, promote the optimization of major economic structures, and achieve stable economic growth.Macro-control mainly uses economic means such as price, taxation, credit and exchange rate, as well as legal means and administrative means.Extended from this, other measures taken by the government to compensate for market failures are usually included in the scope of macro-control.

(End of this chapter)