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Market Economy Balanced by Government Regulation

Prosperity for a market economy and justice for government is assured through a coequal

relationship. Both the market and government are influential as economic and political

institutions; therefore, neither a market economy nor government can produce prosperity and

justice alone. Markets are fundamentally flawed; government provides the insurance of

prosperity. The weaknesses of markets are alleviated through strengths of an established

counterpart, government. In a balanced relationship, the market achieves stability from

government, and government receives revenue from the market.

Economic Institutions

A well managed and well maintained market can insure economic prosperity. Prosperity

for the market can be defined through efficiency, growth, and stability. Market competition

requires businesses to attain the newest and best technology accessible to produce goods at

higher levels of efficiency. As efficiency of business improves, the cost of production is

lowered. Business competition provides the consumer with the best manufactured goods

possible at the lowest cost of production. Competition also allows market growth by

encouraging individual risk taking. When individuals are free to assess decisions, innovations

and technology developments improve efficiency and standards of living. Innovation and

technology development improves the availability of resources and the quality of production,

thereby improving efficiency. Economic stability is facilitated by competition as well. As the

conditions of business change with consumer input, businesses react quickly to insure serious

imbalances do not occur.

However, since the market is ultimately flawed, government must intercede to ensure

efficiency, growth, and stability. Inefficiency of the market is due to resource immobility and
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high concentrations of power and wealth in small numbers of businesses and individuals.

Government can initiate legislative policy to limit these high concentrations of wealth and power

through antitrust laws, regulation, and a minimum wage. External costs of production, such as

pollution, lower social efficiency. Intangible goods such as clean air and education improve

social efficiency but are non-profit commodities. The market’s inability to improve social

efficiency impedes economic growth. Government can impose regulation to reallocate resources

to ensure cleaner air. Education can be reassured by government financing through

government’s control of taxes and interest rates. Control of taxes and interest rates can offset

recession of the boom and bust cycle and inflation.

Political Institutions

The market is not limited to act as just an economic institution. The market is as

influential to politics as government, aiding the achievement of justice. For government, justice

can be explained by freedom, equity, and order. Individuals have a large array of choices in

employment and education. In a competitive market, consumer patterns are free from oppression

of any one business, or monopoly. With competition, the market allows equity by creating

numerous employment opportunities unhindered by individual characteristics. Characteristics do

not predetermine success or failure in the market. Rewards and failures are based solely on the

individuals’ assessments and decisions. As a result, social order is maintained when resentment

is not placed on any one individual, group, or organization. Further social and economic order is

fostered as the market becomes more specialized through education; groups of specializations

become mutually dependant on others.

Yet, the market is still flawed as a political entity. The market limits freedoms and

choice by only pursuing commodities that generate profit. Education, civil rights, and clean air
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are intangible goods commonly ignored by the market, maintained and financed by government.

Government produces the freedom and choice to pursue these goals outside the market. Markets

tend to only recognize property rights ensuring a growing upper class, disappearing middle class,

and growing lower class. Competitive markets allows high concentrations of wealth and power

leaving the working class at a disadvantage and vulnerable to loss of human rights. Government,

however, recognizes human rights in addition to property rights. Inequity of human rights leads

to social disorder, harming economic order and prosperity. Government can maintain order by

establishing rules and obligations for the market and the working class, thereby alleviating

conflict.

And still, the government is not immaculate. Government’s control of the police force

and military can lead to oppression and a loss of general freedoms for individuals and the

market. Loss of freedom for individuals and the market causes inequity and social disorder,

compromising justice. Continuous undermining of competitive market parameters by

government causes individuals in the market to lose incentive that fostered innovation and

technology development. Loss of incentive and reward leads inefficiency of the workers and

therefore production. Lowered efficiency hinders growth of the economy and its stability.

Conclusion

Collaborative efforts of an established government can ensure a market economy does

not compromise prosperity and justice. An unregulated competitive market leads to inefficiency

and social disorder, obstructing the path towards prosperity and justice. Regulation must be

limited, however, to ensure that government does not restrict the functionality of a competitive

market. When the relationship of a market economy and government are balanced, the stable

market will provide government with continued revenue.