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Raja Bobbili Thursday, September 26, 2002 Market and Command Economies Market Economies and Their History A market economy, also a capitalist economy, is an economic system where there is freedom of ownership on the means of production. Emphasis is on individual liberties, with the government playing a very minimum role in the control of market mechanism. The idea of the market economies was stated in Adam Smith's book Wealth of Nations, written in 1776. This is where it is stated that efficiency is achieved by having the invisible hand of the market operating in the form of demand and supple forces. This is demonstrated by a demand and supply diagram, example of which is given in figure 1.1. Fig 1.1 Prices of goods are freely determined in the bargaining process through forces of demand and supply. The monetarists and classical economists believed in the free market forces or supply side economies, where government allows...

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