Market Economy

An economic system. Market economy is a product of the development of commodity economy, formed and developed at a certain stage of development of commodity economy. When the commodity production and commodity exchange has developed to a certain degree and the market mechanisms can regulate the productive and operative activity of enterprises, making the market play a decisive role in the allocation of resources, the commodity economy has developed into market economy. Commodity economy and market economy are closely related. Although commodity economy is not tantamount to the market economy, market economy is necessarily a commodity economy, a commodity economy in which the market can play a regulatory role and thus determine the allocation of resources. On the other hand, there is a difference between the two. Commodity economy is a concept opposite to the natural economy. The exchange of commodities according to their values reflects the indirect social nature of labor, i.e., the relation between individual labor and social labor of men. Market economy is the concept opposite to planned economy, i.e., an economic system that allocates resources by means of mandatory plans and regulates social resources by means of administrative orders. It is characterized by the allocation of the factors of production and the regulation of income distribution through the market.

Historically, market economy has been formed and developed mainly in the capitalist system, but it does not have the property of basic system of society in itself and belongs to the category of economic system. The general laws of its operation do not change due to differences in the socio-economic systems. The general features of the market economy are that the allocation of resources in socio-economic activity is chiefly regulated by the market, and that the market is the principal mode for achieving the allocation of resources of the elements of production and circulation; that following the law of value, the prices adapt to the changes in the relations of demand and supply and competition, and that they serve as economic signals for market development; that the enterprises are the chief subjects of market, and the state carries out macroeconomic regulation by using various means; that there is a sound market system, and relatively strict and sound laws, regulations and market systems have been established, etc. In a general sense, the socialist market economy is basically similar to the capitalist society in terms of method.