Assignment 2: Capitalism And The US Economy In A Comm 105860

Assignment 2 Capitalism And The Us Economyin A Command Or Planned E

Assignment 2: Capitalism and the U.S. Economy In a command or planned economy, the government, not the market, regulates the factors of production and economic activities considered essential to the function of the economy. Economic decisions including what goods and services to produce (supply), how resources are allocated and regulated and how profits are distributed are made and implemented by the government. How is the U.S. economy different from a command economy? Can the U.S. economy be called a true free market economy?

Explain your answer by discussing the ways in which the federal government interacts with and regulates the U.S. economy in the context of both a command and free market economy. Provide examples and justify your conclusions. Quotations, paraphrases, and ideas you get from books or other sources of information should be cited using APA style .

Paper For Above instruction

The United States economy is often characterized as a mixed economy, balancing elements of free market capitalism with government regulation and intervention. Unlike a command or planned economy, where the government exerts significant control over economic activities, the U.S. economy relies primarily on market mechanisms, but with notable government oversight that shapes but does not dominate economic decision-making.

In a purely command economy, such as North Korea or the former Soviet Union, state authorities control the means of production, decide what goods are produced, how resources are allocated, and how profits are distributed. These economies often lack the individual entrepreneurial freedoms that are characteristic of free markets. Conversely, a free market economy emphasizes minimal government intervention, where supply and demand determine prices, production, and resource distribution, as exemplified by classical liberal economic theories.

The U.S. economy distinctly differs from a command economy due to its predominant reliance on free market principles. According to Mises (1991), free markets are driven by voluntary exchanges and entrepreneurial initiative, with prices serving as signals for resource allocation. In the U.S., private businesses own the majority of resources and production assets, and market forces largely determine economic outcomes. However, the government plays a crucial regulatory and oversight role, influencing the economy through policies, regulations, and fiscal measures.

Federal agencies such as the Securities and Exchange Commission (SEC), Federal Trade Commission (FTC), and the Department of Commerce exemplify government regulation that aims to maintain fair markets, protect consumers, and promote economic stability. For instance, antitrust laws prevent monopolies and promote competition, indicative of market regulation rather than direct control. The Federal Reserve also influences economic activity by adjusting interest rates and regulating the money supply, which impacts inflation, employment, and economic growth.

The U.S. government additionally intervenes in specific sectors, such as agriculture, healthcare, and transportation, through subsidies, regulations, and public programs. For example, the Agricultural Adjustment Act subsidizes farmers to stabilize prices, demonstrating targeted intervention rather than direct command. Similarly, government responses to financial crises, such as the 2008 recession, involved bailouts and stimulus packages aimed at stabilizing the economy—actions that diverge from pure market operation.

While the U.S. economy incorporates significant government intervention, it maintains core capitalist features, including private property rights, competitive markets, and profit incentives. The extent of government regulation suggests it is not a "true" free market economy but rather a mixed system balancing market freedom with regulatory oversight. This hybrid approach aims to harness the benefits of free enterprise while mitigating market failures and economic inequalities (Ackerman & Heinzerling, 2013).

In conclusion, the U.S. economy is fundamentally different from a command economy due to its reliance on private enterprise, voluntary market transactions, and limited government control. However, it cannot be accurately described as a pure free market economy because of the substantial government involvement that influences various sectors and economic activities. This balanced approach seeks to promote economic growth, stability, and social welfare, illustrating the unique nature of the American economic system.

References

Ackerman, F., & Heinzerling, L. (2013). Pricing the priceless: A healthy economy, sustainable future, and the true value of public goods. Yale University Press.

Hayek, F. A. (1944). The Road to Serfdom. University of Chicago Press.

Johnson, H. G. (2009). The Economics of Federal Regulation. Harvard University Press.

Krugman, P., & Wells, R. (2018). Economics (5th ed.). Worth Publishers.

Mises, L. v. (1991). Human Action: A Treatise on Economics. Ludwig von Mises Institute.

Schmidt, V. (2015). Market Regulation and the Role of Government. Routledge.

Stiglitz, J. E. (2002). Globalization and Its Discontents. W.W. Norton & Company.

U.S. Federal Reserve. (2023). Monetary Policy and Economic Stability. https://www.federalreserve.gov/monetarypolicy.htm

White, L. J. (2015). The Regulation of Financial Markets. Harvard Business Review Press.

Woodward, B. (2004). The New Economic Rule: The Value of Markets and the Wealth of Nations. Princeton University Press.