A command economy is an economic system in which the state plays the main role in regulating it. In this system, the state determines what products should be produced and in what quantities, for whom to produce them, and how to produce them. Why is the state assigned the role of the main regulator in the economy? Because in this economic system, state ownership of all basic means of production predominates, that is, the bulk of economic resources are owned by the entire population living in the country. On behalf of the population, the state manages the distribution of all basic economic resources, as well as their use.

Due to little or no private ownership of the means of production, there is no market in a command economy. It is being replaced by centralized planning, distribution and supply. However, there are elements of the market here. Produced products are considered goods, but prices for them are set by the state. There is a network of trade institutions that act as intermediaries between sellers (state or cooperative enterprises) and buyers (enterprises, institutions or the public).

The advantages of a command economy are:

1) minimum uncertainty in changes in the economic situation in the near future, relatively stable economic development;

2) the possibility of setting social goals for the economy and achieving them;

3) the absence of sharp differences in the income levels of the population between its various groups, which contributes to a more even development of all layers of society;

4) the ability to maintain a stable level of employment.

But, like any economic system, a command economy has its drawbacks:

1) lack of freedom of choice of goods (in particular, means of production) for sellers and buyers - everything is planned and distributed in advance;

2) the need to create a large, complex bureaucratic structure of economic management, which often interferes with the rapid adoption of operational decisions;

3) subjectivity in economic management, which leads to imbalance and disproportionate development of industries;

4) alienation of owners (population) from property (means of production) and lack of competition (competition), which leads to lack of initiative among workers and insufficient incentives for more efficient use of economic resources; as a result - underutilization of the achievements of scientific and technological progress, decreased efficiency, and stagnation in the economy.

An example of a command economy is the economic system in the former Soviet Union and in countries of the socialist direction of development.

Planned economy (administrative command system) previously dominated in the USSR, countries of Eastern Europe, and a number of Asian states.

The characteristic features of the ACS are public (and in reality, state) ownership of almost all economic resources, monopolization and bureaucratization of the economy in specific forms, centralized economic planning as the basis of the economic mechanism.

The economic mechanism of the AKS has a number of features. It assumes, firstly, direct management of all enterprises from a single center - the highest echelons of state power, which negates the independence of economic entities. Secondly, the state completely controls the production and distribution of products, as a result of which free market relationships between individual farms are excluded. Thirdly, the state apparatus manages economic activities using mainly administrative and administrative (command) methods, which undermines material interest in the results of labor.

Complete nationalization of the economy causes monopolization of production and sales of products on an unprecedented scale. Giant monopolies, established in all areas of the national economy and supported by ministries and departments, in the absence of competition, do not care about the introduction of new equipment and technology. A deficit economy generated by a monopoly is characterized by the absence of normal material and human reserves in case of an imbalance in the economy.

In countries with ACN, solving general economic problems had its own specific features. In accordance with the prevailing ideological guidelines, the task of determining the volume and structure of production was considered too serious and responsible to transfer its decision to the direct producers themselves - industrial enterprises, state farms and collective farms.

The centralized distribution of material goods, labor and financial resources was carried out without the participation of direct producers and consumers, in accordance with pre-selected public goals and criteria, on the basis of centralized planning. A significant part of the resources, in accordance with the prevailing ideological guidelines, was directed to the development of the military-industrial complex.

The distribution of created products among production participants was strictly regulated by central authorities through a universally applied tariff system, as well as centrally approved standards for funds in the wage fund. This led to the predominance of an equal approach to wages

Main features:

state ownership of almost all economic resources;

strong monopolization and bureaucratization of the economy;

centralized, directive economic planning as the basis of the economic mechanism.

Main features of the economic mechanism:

direct management of all enterprises from a single center;

the state fully controls the production and distribution of products;

The state apparatus manages economic activities using predominantly administrative-command methods.

This type of economic system is typical for: Cuba, Vietnam, North Korea. A centralized economy with an overwhelming share of the public sector, it is largely dependent on agriculture and foreign trade.

Command economy

The pure capitalism presented above has its antipode (opposite) in the form of a centralized (command-administrative) system, characterized by state ownership of all material resources and the adoption of important economic decisions through collective meetings and centralized economic planning. In other words, the means of production (land, capital) are concentrated in the hands of the state - the leading economic entity, and economic power can be spoken of as centralized. It is important to consider that the market does not determine the balance of economic forces (it does not affect which companies produce what, which of them will withstand competition); prices for goods and services are determined by the government. The central planning body (CPO) carries out the distribution of initially available and finished products; its competence includes the task of what products should be produced and in what quantity, what the quality of these products will be, from what resources and raw materials they will be produced. Once these issues have been resolved, the CPO transmits the order (implements directives) to specific enterprises indicating the necessary details. It is worth noting that enterprises located in the country also belong to the state.

A significant advantage of this model over others is the achievement of conditions conducive to the absence of obvious unemployment due to the centralized distribution of resources and accounting, in particular, of all available labor resources. Another point is that due to strict centralization of management, it is possible to control the distribution of income among the population.

At the first stage of economic planning, the task of the central planning authority is to draw up a five-year plan for the development of the country's economy as a whole. Subsequently, this plan is refined and detailed, divided into more detailed points, and ultimately ready-made plans for economic sectors and individual enterprises are obtained. At the same time, it is worth noting the presence of feedback from these very enterprises - at the stage of designing plans, they themselves give assessments and comments on the optimality of the required indicators. The ultimately approved plan must be implemented almost without question.

However, it would be wrong not to talk about the difficulties in implementing this model. Among the priorities is the problem, directly, of centralized economic management, as one of the most difficult. And here an important place is given to the problem of informing government planning bodies about the state of the economy directly at a given point in time. Indeed, in this case, it is very difficult to assess the influence of numerous factors and track changes in indicators characterizing the state of the economy (production costs, consumption growth, resource consumption). At the same time, even statistically collected information changes quickly, which makes planning often inconsistent with the times. The higher the degree of centralization of management, the more distorted the adequacy of economic indicators from bottom to top is. Often, many economic institutions deliberately distort the obtained indicators in order to ultimately appear to management in the most favorable light.

Problems arise in a planned economy when trying to introduce new technologies into production or when it comes to releasing new products. This is explained by the control of the enterprise management by higher-level management and subordination exclusively to its directives (commands), which cannot always be assessed objectively. It is in a market economy that enterprises strive to minimize costs and put on the market a new product that is superior to competitors and allows them to earn a profit, keeping the company afloat in a constantly changing market environment. In the directive model, however, flaws in the management structure and an inadequate level of awareness do not allow adequately increasing the production efficiency of a particular enterprise in proportion to its potential.

To summarize, it is worth noting the following advantages of this model:

Centralized management makes it possible to concentrate funds and other resources in certain areas of highest priority at the moment

Creating social stability, a feeling of “confidence in the future.”

Of the minuses it is worth noting:

Low level of satisfaction of consumer needs

Lack of choice in both production and consumption (including shortages of consumer goods)

Achievements of scientific and technological progress are not always implemented in a timely manner

An administrative-command economy appears in authoritarian states, where the bureaucratic apparatus completely controls economic processes and neglects the right of citizens to private property.

In such states there is not even a minimum degree of economic freedom.

Examples of states that have used ACS:

• THE USSR;
• European countries of the socialist bloc;
• North Korea (to date).

Advantages and disadvantages

• state monopoly in all spheres of economic activity;
• extreme degree of bureaucracy;
• directives as the main method of achieving economic indicators;
• lack of balance between supply and demand;
• the country's population does not participate in the process of income distribution;
• uncontrolled growth of inflation (often commodity barter replaces payment in money);
• actual lack of opportunity to choose goods;

In the USSR, the planned economy helped to successfully pass the stage of industrialization. In a short time, heavy industry and social infrastructure were created. On the other hand, there was a total deficit and irrational use of resources.

A striking attribute of a command economy is the so-called “five-year plan”. The state apparatus issued orders to enterprises about the need to achieve certain economic indicators over a certain period. Directiveness provided minimal stability, but did not allow the economy to develop.

A command economy has a negative impact on the labor market: although there is no unemployment, “equalization” reigns. This is a remuneration system in which people without special skills are paid on an equal basis with highly qualified workers.

The command economy is a source of social and political contradictions. For the modern world, this is a vicious system. It is believed that it is AHS that leads to the collapse of the authoritarian system.

Economic strategy determines all aspects of ownership of resources such as land, capital and labor. Throughout the history of civilization, there have been many types of economic systems that reflected natural conditions, national conditions, religious principles and others. Thanks to this diversity, we can distinguish the main types - free market and command economy.

What is it command economy, and how does it manifest itself? This term refers to a form of economic organization in which all material resources are distributed by the government and are owned by the state. Government obligations require businesses and individuals to act in accordance with economic central planning. That is why command economy can be characterized by the use of directive methods and a high level of centralization of functions.

Centralized or command economy is considered the opposite. For each enterprise, all destinations are provided - what to produce, in what volume to produce, how to produce and for whom to produce. Thus, the state itself decides the issue of suppliers and buyers. And also some specific resources are allocated. Then, after the plan is adopted, they can be distributed among the main sectors on the basis of long-term priority relationships, which are determined by the planning authority.

Thus, the economic system, in our case - command economy, reflects that all decisions necessary for making and planning are made by public state activities. In this case, efficiency can arise only when there is deep knowledge of economic laws, and also if strict requirements and implementation of these laws are followed. Also, the effectiveness of a command economy will arise only when improved forces are introduced under the influence of scientific and technical progress. Thus, knowledge and following the right tactics allows you to achieve optimal operation of a command economy.

Command economy, like economics of the company, involves studying the processes of functioning of factors and various industries, modern approaches that will ensure effective work in the enterprise; management mechanisms that contribute to being a leading company in the market; management and organization and strategic prospects of the enterprise, as well as innovative actions of business entities.

Today, only humans are capable of creating and introducing various innovations into production. If artificial intelligence appears, then a post-economic era will appear, in which all the need for decision-making will disappear. And such a concept as post-industrial economy defines such relationships that arise as a result of post-industrial society.

What needs to be understood in the term post-industrial society? This is a society whose economy dominated the productive resource. Here, scientific developments become the main driving force for the economy. It is thanks to the post-industrial economy that the main qualities and valuable qualities of an employee are professionalism, level of education, creativity and learning ability.

Thus, in economic development, more practical definitions of information, service, innovation, and knowledge economy are used.

General characteristics of a command economy

Command economy- an economic system in which the state plays the main role in regulating it. In this system, the state determines what products should be produced and in what quantities, for whom to produce them, and how to produce them. Why is the state assigned the role of the main regulator in the economy? Because in this economic system, state ownership of all basic means of production predominates, that is, the bulk of economic resources are owned by the entire population living in the country. On behalf of the population, the state manages the distribution of all basic economic resources, as well as their use.

Due to the insignificant share of private ownership of the means of production or its absence, there is no market in a command economy. It is being replaced by centralized planning, distribution and supply. However, there are elements of the market here. Manufactured products are considered goods, but prices for them are set by the state. There is a network of trade institutions that act as intermediaries between sellers (state or cooperative enterprises) and buyers (enterprises, institutions or the public).

Note 1

A command or planned economy is characterized by centrally deciding what, how, for whom and when to produce. The demand for goods and services is established based on statistical data and plans of the country's leadership. A command economy is characterized by high concentration of production and monopolism. Private ownership of factors of production is practically excluded or there are significant obstacles to the development of private business.

A crisis of overproduction in a planned economy is unlikely. Shortages of quality goods and services are becoming more likely. Indeed, why build two stores next to each other when you can get by with one, or why develop more advanced equipment when you can produce low-quality equipment - there is still no alternative. Among the positive aspects of a planned economy, it is worth highlighting the saving of resources, especially human resources. In addition, a planned economy is characterized by a quick response to unexpected threats - both economic and military.

Advantages and disadvantages of the economic system

Benefits command economy are:

minimum uncertainty in changes in the economic situation in the near future, relatively stable economic development;

the ability to set social goals for the economy and achieve them;

the absence of sharp differences in the income levels of the population between its different groups, which contributes to a more even development of all layers of society;

the ability to maintain a stable level of employment.

But, like any economic system, a command economy has its own flaws:

lack of freedom of choice of goods (in particular, means of production) for sellers and buyers - everything is planned and distributed in advance;

the need to create a large, complex bureaucratic structure of economic management, which often interferes with the rapid adoption of operational decisions;

subjectivity in economic management, which leads to imbalance and disproportionate development of industries;

alienation of owners (population) from property (means of production) and lack of competition (competition), which leads to lack of initiative among workers and insufficient incentives for more efficient use of economic resources; as a result - underutilization of the achievements of scientific and technological progress, decreased efficiency, and stagnation in the economy.

Example 1

An example of a command economy is the economic system in the former Soviet Union and in countries of the socialist direction of development.

Comparing a market economy with a command-administrative economy, we can identify two main differences, which are presented in table. 1.

Figure 1. Characteristics of market and command economic systems according to two main characteristics

Basic ideas of command economy

Directive planning. The administrative-command system is based on the principle of directive planning. The plan developed by the center (the State Planning Committee of the Council of Ministers of the USSR) is the basic law of the administrative system. Based on the plan, line ministries develop tasks for sectors of the economy, and then material resources are allocated for enterprises, construction sites, and collective farms.

All manufactured products of enterprises are transferred to the disposal of higher authorities of logistics or trade ( State Committee for Logistics and Technical Supply), who pass it on to consumers.

Economic levers in the control mechanism (prices, wages, bank interest) play formal character. Prices for goods and salaries for workers are determined by the center (the State Price Committee under the Council of Ministers of the USSR). The main savings of enterprises are withdrawn to the budget (USSR Ministry of Finance).

Employee motivation. For each category of workers, the official salary is determined centrally in the same way throughout the country (USSR State Committee for Labor and Social Issues). Additional bonuses are paid for the implementation of the center's plans, from a limited fund of bonuses, only at the direction of the authorities. Administrative encouragement and coercion play a significant role in motivating employees. Encouragement is promotion, coercion is reprimands and punishments.

Contradictions of a command economy:

The center is not able to cover the entire economy and every enterprise with its leadership.

The upper floors of the administrative system are overloaded with current work.

The problem of economic assessments of decisions made. To evaluate the decision made, it is necessary to compare the resources expended and the resulting products. But this comparison requires objective prices corresponding to socially necessary costs, which can only be determined by the market, and not by the administrator.

The quality of decisions made depends personally on the personality of the leaders, especially the first person.

The slowdown in scientific and technological progress is caused by the fact that all rights to major decisions are concentrated on the upper floors of the management system and the decisions themselves are made by strong-willed, subjective methods.

The criterion for the nomination of management employees is not creativity and competence, but diligence and the ability to carry out orders from superiors without thinking, and personal acquaintance with the manager. Preference when nominating is given to those who, due to their business qualities, cannot compete with those nominating. As a result, the quality of leadership is steadily deteriorating.

Topic 1. Economic systems.

Traditional economic system

A traditional economy is an economic system in which the main economic problems of society - what, how and for whom to produce - are solved mainly on the basis of traditional patriarchal, tribal, semi-feudal hierarchical ties between people. At its core, the traditional economy is a set of subsistence farms in which the bulk of products are produced for own consumption and not for sale. As the most important economic units The traditional economy consists of small family farms within the rural community and larger farms of the tribal aristocracy. Within the traditional economy there is a natural and rudimentary social division of labor, primitive traditional technology for cultivating land, raising livestock, and crafts.

The volumes and structure of needs and production in a traditional economy are determined by traditions, habits, beliefs, family relationships, hierarchical relationships within the clan and community and change little over time. These traditions, passed on from generation to generation, determine both the labor motivation of producers and the mechanism for distributing the products of labor. Along with equal distribution taking into account gender and age, there are elements of unequal distribution depending on the place occupied in the social hierarchy and depending on the results of labor.

The most important resource of a traditional economy is people. Technology in such a society was poorly developed; technologies associated with high labor costs were used. In such an economic system, people were divided into classes, social ranks, castes, which existed in ancient and medieval societies. No one could choose a profession at will; people were obliged to inherit the occupation of their father, who belonged to one class or another.

Thus, the distribution of labor resources occurred automatically and was repeated from generation to generation. It's the same with technology. The young do everything the same way as the generations of their ancestors did - each young artisan copied the work methods of their teachers, without making improvements to the work. Every detail of the manufactured products was standardized and secured by certain rules that prohibited certain improvements.

Customs change very slowly, so the production process and the list of products produced in the traditional economy changed slowly. At the same time, centuries-old traditions allowed the artisans of the past to achieve a high level of skill. And in those countries where traditions are still strong today (for example, in India), this level is maintained to this day. At the same time, production methods remain the same as hundreds of years ago. Products and services produced in such societies, as a rule, do not change for tens or hundreds of years. Issues of distribution and exchange of production products are resolved in the same way, following custom. For example, all the best is given to the chief or owner of the land, and the rest is distributed among the members of the society.

In the socio-economic structure of the traditional economy, the following types of property can be distinguished:

· collective (community) ownership of the means of production,

· private family property,

· semi-feudal property of the tribal aristocracy.

In the modern world, traditional economics plays a significant role only in the developing countries of Tropical Africa, South and Southeast Asia. The existence of a traditional economy next to a rapidly developing market economy leads to its degeneration and transformation into a market economy.

Administrative command economy

Administrative command (planned) economy - an economy in which the state form of ownership predominates and major, as well as less significant, economic decisions are made at the highest level of management and administratively, in the form of commands that are mandatory for execution, are communicated to each economic unit. A centralized bureaucratic management system uses mainly non-market levers to carry out directive tasks and decisions.

The purpose of a planned economic system is to:uh The economy of any state, as well as the state apparatus itself, are created to meet the needs that underlie any economic system, but, at the same time, each such system offers its own specific mechanisms for implementing this principle, and also has its own focus - goal or target function. As for the planned economic system, it proclaims the following target function: the economy and production, in particular, are focused on satisfying public and personal needs. Production in the interests of improving the well-being and development of the entire community of workers and each of its members is the main proclaimed motive for the establishment of a planned economic system.

Features of an administrative-command economy include the following provisions:

· The role of the state in a planned economy is quite large: The state is an apparatus for managing and coordinating the socio-political and economic life of society. In the interpretation of a planned economy, the state acquires another important function - it becomes an economic center and a direct control link of the entire economic system. This is expressed in the protection of the socialist (state) form of ownership, strict coordination of production and control over consumption. The state, representing the community of workers, becomes a subject of public property, which ensures control and the leading role of the state in all spheres of activity and at all its stages. Although in this case the state is not responsible for the obligations of other property entities, just as they are not responsible for the obligations of the state.

· The main feature of a command economy is its systematic nature., as the main instrument of the state in economic management. Planfulness- this is consistency, coordination of economic processes aimed at forming the proportions of social production in connection with its goals. In fact, it was expressed in the formulation of plans that were mandatory for implementation and did not always reflect real capabilities and needs. It was one of the main characteristic features of the command economic system.

· A characteristic feature of the administrative-command economy in practice was an extensive way to expand production, which did not ensure the qualitative side of economic growth. Theoretically, the so-called “new quality of economic growth” was proclaimed, which included the constant updating of production capacities, improving product quality and structural restructuring of the economy.

· Unlike a market economy, in the planned economy the most important component of the state’s economy was considered not to be the service sector, but the production sector.

Based on the role of the state in the spheres of production and consumption, as well as taking into account the main goal of the entire economic system, we can imagine distribution in society as follows: the totality of all produced goods (social product) was accumulated by the state, which, in turn, established the shares of various spheres of activity, industries, enterprises, social groups, work collectives, families and their members in consumption, and only after that the goods went on sale. Thus, a relatively uniform level of consumption was ensured among all members of society, with a relatively uniform level of income for each. This satisfies the needs of both producers and consumers.

The most characteristic feature of a planned economic system is state (public) form of ownership, being the most important pillar of state power. The idea of ​​the nationwide nature of state ownership was that every worker should also be the owner of the means of production, that is, the owner of his workplace. To achieve this, it was supposed to include every worker through the work collective in the production management process. In practice, the worker did not have full property rights: to own, use, dispose of - he could only use the state means of production, and only within the framework established by the plan, or the desire to exceed it.

The economic system of farming, chosen by society, has as its goal the effective satisfaction of its needs. The most important criterion for the effectiveness of a planned economy is the complete satisfaction of public and personal needs with the most rational use of public resources. At the same time, the final result of the development of production should be the person himself, therefore efficiency in a planned economy is considered precisely in social economic aspect. In general, economic efficiency is the ratio of the final result of production to the costs of production factors.

Remuneration in a planned economy is considered as the main form of manifestation of the law of distribution In terms of labor, at the same time, it remains the main and only source of income generation for the population. The planned economy declares a direct dependence of the amount of wages on the complexity of the labor involved, which is the principle of wage differentiation. However, the level of such differentiation remains generally quite low.

Supply and demand in a planned economy: The most important lever of influence on both demand and supply is prices. At the same time, the state has a monopoly on setting prices for all types of products. Depending on various circumstances, the established state price may differ from the actual price of the product, which may negatively affect its producers.

Advantages of a planned economy:

1. Despite the fact that business management bodies are guided primarily by the task of satisfying minimal needs, such needs are satisfied for absolutely everyone. This eliminates the problem of poverty, especially characteristic of a market economy, as well as the problem of subsidized unprofitable regions of the state. This is considered the main advantage of this economic system, and it was this that at one time led to its establishment as dominant in the vastness of Eastern and Central Europe, Asia and in some regions of Africa and Central America.

2. It should also be noted that the comparative similarity of income levels of the entire population completely eliminates the possibility of class stratification of society and the superiority of the richer strata of the population over the poor. This is also explained by the presence of a distribution function in a state with an administrative-command economic system. It consists in the distribution and redistribution of the total product produced in the state in order to most fully satisfy the needs of society and people.

3. The existence of centralized planning formally greatly facilitated the work of the production sector of the economy: the manufacturer does not need to think about what, how and for whom to produce; answers to these questions are given by a directive from the relevant governing authority.

4. The declaration of public ownership provides a theoretical opportunity and creates a real impression for each member of society of involvement in the management of resources and means of production, to which it applies. This plays an important role in motivating staff, which is not always easy to achieve when using market mechanisms.

5. All goods are sold and purchased at prices established by special government bodies. This does not allow the market to dictate its terms in setting the price of a product, which, in turn, provides some price stability for a much longer period, than is possible in a market economy.

A planned economy is theoretically aimed at satisfying social and personal needs. There are two main aspects to this provision. The first consists of giving greater importance to social needs and is not entirely positive. The second is that the socialist economic system presupposes a different approach to the classification of needs, different from Maslow’s pyramid of needs, which is actively used in the market economic system.

Market economy

The modern market economy is a complex organism, consisting of a huge number of diverse production, commercial, financial and information structures, interacting against the backdrop of an extensive system of business legal norms, and united by a single concept - the market. The most simplified definition market is a place where people as sellers and buyers find each other.

It guarantees, first of all, consumer freedom, which is expressed in freedom of consumer choice in the market for goods and services. Freedom of entrepreneurship is expressed in the fact that each member of society independently distributes its resources in accordance with its interests and, if desired, can independently organize the process of production of goods and services. The individual himself determines what, how and for whom to produce, where, how, to whom, how much and at what price to sell the produced products, how and on what to spend the proceeds. Freedom of choice becomes the basis of competition.

A market economy has the following features:

· private property – it forms the basis of a market economy. Various types of forms of private property make it possible to ensure the economic independence of economic entities. It is a guarantee of compliance with concluded contracts and non-interference of third parties. Economic freedom is the foundation and integral part of the freedoms of civil society.

· free enterprise - economic freedom gives the manufacturer the opportunity to choose types and forms of activity, and the consumer the opportunity to buy any product. A market economy is characterized by consumer sovereignty - the consumer decides what should be produced.

· pricing based on the mechanism of supply and demand - thereby the market performs a self-regulating function. Provides a rationally efficient way of production. Prices in a market system are not set by anyone, but are the result of the interaction of supply and demand.

· Competition generated by free enterprise and freedom of choice forces producers to produce exactly those goods that customers need, and to produce them in the most efficient way.

· limited role of the state - the state only monitors the economic responsibility of subjects of market relations - forces enterprises to answer for their obligations with the property they own.

The advantages of the market include:

· Efficient resource allocation- the market directs resources to the production of goods necessary for society. The main economic argument for a market economy is that it promotes efficient allocation of resources. According to this thesis, a competitive market system directs resources to produce those goods and services that society needs most. It dictates the use of the most effective methods for combining resources for production and promotes the development and implementation of new efficient production technologies. The "invisible hand" of the market thus controls the production of the greatest quantity of necessary goods from available resources. This therefore implies maximum market efficiency.

· Freedom of choice and action for consumers and entrepreneurs. The market system makes clear the meaning of freedom of enterprise and choice. Consumers are free to buy what they prefer; enterprises - produce and sell what they consider appropriate; Resource providers can choose to use their material and human resources at their own discretion. However, consumer demand decisions, which make some products profitable and others unprofitable, limit firms' free choice in deciding what to produce. Businesses must align their choice of product to produce with the choice of consumers.

· The ability to satisfy diverse needs, improve the quality of goods and services, and the tendency to reduce prices. In order to maintain high profitability and competitiveness of their products, companies strive to expand their range and improve the quality of their products. Along with attracting attention to updated product models, manufacturers have several other very effective levers in attracting consumer votes. First of all, this is an increase in quality and a reduction in the price of goods. It is quite natural that from a number of similar products offered by competing companies, the consumer strives to choose the highest quality and most affordable option. The downward trend in prices is based on the constant desire of producers to use available resources more efficiently. As technology improves and production costs decrease, it becomes possible to reduce the price of a product.

· Flexibility, high adaptability to changing conditions. The ability of the market system to signal changes in such a basic area as consumer tastes and to cause appropriate reactions on the part of enterprises and resource suppliers is called the guiding or guiding function of prices. By affecting product prices and profits, changes in consumer tastes dictate the expansion of some industries and the contraction of others. These adjustments are realized through the resource market, as expanding industries place greater demand on resources, and contracting industries reduce their demand for them. The resulting changes in resource prices redirect resources from shrinking to expanding industries.

· Initiation and optimal use of the results of scientific and technological progress. A competitive market system contains incentives for technological progress. The use of advanced technologies provides an innovative company with a temporary advantage over its competitors. Reducing production costs means for the pioneer firm obtaining economic profit. Moreover, a competitive market system certainly creates an environment conducive to the rapid diffusion of new technology. Competitors must follow the example of the most progressive company, otherwise they will immediately be overwhelmed by a wave of losses, threatening bankruptcy.

Market disadvantages include:

· Fading competition. The critical statement is that the structure of a market economy allows and even to a certain extent stimulates the extinction of the main control mechanism - competition. There are two main sources of the weakening of competition as a control mechanism: 1) Although competition is desirable from a social point of view, it is most annoying to the individual producer because of its ruthless efficiency. The free, individualistic environment in a market economy is characterized by the fact that entrepreneurs, in pursuit of profit and in an effort to improve their economic position, try to free themselves from the restrictive shackles of competition. Mergers of companies, secret conspiracies of companies, cut-throat competition - all this contributes to the weakening of competition and the evasion of its regulatory impact. 2) The technological progress that the market system encourages contributes to the decline of competition. The latest technology, as a rule, requires: a) the use of very large amounts of real capital; b) large markets; c) a complex, centralized and strictly integrated market; and d) rich and reliable sources of raw materials. This kind of technology means the need for manufacturing firms that are large-scale not only in absolute terms, but also in relation to market size. In other words, achieving maximum production efficiency through the use of the latest technology often requires the existence of a small number of relatively large firms, rather than a large number of relatively small ones.

· Uneven distribution of income. In this case, it is noted that the market is not focused on the production of socially necessary goods, but on satisfying the needs of those who have money. The market system allows the most capable, or dexterous, entrepreneurs to accumulate enormous amounts of material resources, and the right of inheritance enhances this accumulation process over time. This process, in addition to quantitative and qualitative differences in human resources supplied by households, gives rise to an extremely unequal distribution of monetary income in a market economy. The market system allocates resources to produce luxuries for the rich at the expense of resources to produce necessities for the poor.

· Wasteful and inefficient production, instability of development. First, the market system may fail to account for all the benefits and costs associated with the consumption of certain goods and services. The fact is that some benefits and costs appear to be external to the market in the sense that they fall on the share of other economic agents who are not directly buyers and sellers. Therefore, the market system is not able to ensure the distribution of resources that best meets the needs of society. Secondly, the violation of the market mechanism is due to the fact that the market system takes into account only individual needs. The market system, it is argued, is unable to accommodate such social or collective needs. Thus, the market system is an imperfect mechanism for ensuring full employment and stable price levels.

· Instability: inflation and unemployment. Economic growth is uneven, interrupted by periods of economic instability, periods of rapid economic growth are sometimes marred by inflation, that is, rising price levels, and there are periods when growth gives way to recession and depression, that is, low levels of employment and production.

· Negative influence of monopolies. As already mentioned above, the development of a market economy is characterized by the concentration of production and capital, which objectively arises as a result of the entrepreneur’s desire to strengthen the position of the enterprise relative to competitors. In this way, very large enterprises can be formed, the distinctive feature of which is that they are assigned the exclusive right to produce and sell a certain type of product or service. This exceptional position allows these monopolies to dictate any price to the market and, accordingly, receive high profits. On the other hand, due to strict ties to a specific enterprise, a monopoly can dictate low prices to resource suppliers.

· Does not provide fundamental research in science. With all the efforts of entrepreneurs to increase the efficiency of existing technologies and ensure the most economical use of resources, they cannot afford to divert resources to conduct fundamental research in science. The distant and uncertain prospect of obtaining economic benefits from this research leads to the allocation of resources in favor of faster and more certain opportunities for profit in other industries.

As noted above, the listed negative and positive aspects of a market economy are based on the contradiction “limitless needs - scarcity of resources.” Inherent in any type of economic organization of society, this contradiction is resolved in a market economy through the market distribution of rare resources between those industries that produce products in demand by consumers, to the detriment of those industries that produce products that are not in demand. Recently, we can note some trends in correcting these shortcomings of a market economy. Among them stand out the function of state regulation of the economy and structural changes in the forms of entrepreneurial activity.