Concept Note

Market Economy is an economic system in which economic decisions and the pricing of
goods and services are guided solely by the aggregate interactions of a countrys citizens
and businesses and there is little government intervention or central planning. In this
market driven self-managed economy, production, distribution, pricing, and investment
decisions are made by autonomous firms based upon their individual interests rather than
upon a macroeconomic plan. Planned economies are in contrast to unplanned economies,
where government decisions drive most aspects of a countrys economic activity.
As any coin has two sides, each of the approaches has its own pros and cons.
We see on account of Market Economy, problems stalking the global economy today are
multiple and interconnected. The most pressing challenges lie in addressing the continued
jobs crisis and declining prospects for economic growth, especially in the developed
countries. As unemployment remains high, at nearly nine per cent, and incomes stagnate,
the recovery is stalling in the short run owing to the lack of aggregate demand. But, as
more and more workers are out of a job for a long period, especially young workers,
medium-term growth prospects will also suffer because of the detrimental effect on
workers skills and experience. The economic woes in many developed economies are a
major factor in the global slowdown. Most developed economies are suffering from
predicaments remnant of the global financial crisis.
Planned economies are where the government controls and regulates production, the use
and allocation of what is produced and the revenue from its production. A planned
economy can also be referred to as a command economy. China, our Indian Economy
prior to liberalization and the former Soviet Union are some examples of this type of
economy. A planned economy is the opposite of a market economy, which is driven by
private enterprise. A planned economy can include both state-owned and privately-owned
but state-directed businesses. Economists have pointed out several advantages of planned
economies.
The advantages in Planned Economy are that the welfare of all citizens is the primary
goal of the economic system. Wasteful competition is avoided and wages are controlled
by the state so that there is no industrial unrest. There is greater emphasis on the quality
of life (health, education, elimination of poverty, moral direction) than on the quantity of
production (output) in the country.

There are opinions that the present crisis is on account of lack of control and organized
planning and this situation would not have been resulted with better planning and
controls. There are equal views that strongly believe that the present status is temporary
and the global economy will be well under way sooner than later and Market Economy
will triumph.