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13 Apr 2024  (4687 Views) 
Tan Kin Lian - Perspectives

Free market and planning

Free markets and planning are two opposing forces in economics.

Free market is an economic system where the production of goods and services is guided by voluntary exchange between private individuals or businesses. Prices are determined by supply and demand, with minimal or no government intervention. Proponents of free markets believe that competition drives innovation and efficiency, leading to a strong economy.

Planning, on the other hand, refers to a more centralized approach to the economy. In a planned economy, the government plays a major role in determining what goods and services are produced, how much is produced, and at what price. This can be done through a variety of mechanisms, such as five-year plans, central banks, and state-owned enterprises. Proponents of planning argue that it can be used to achieve social goals, such as full employment or environmental protection.

In reality, most economies are mixed economies, which combine elements of both free markets and planning. The degree to which an economy is planned or free-market varies from country to country. For example, the United States has a relatively free-market economy, while China has a more planned economy.

There are a number of factors that can influence the decision of how much planning to incorporate into an economy. These factors include the level of economic development, the size and complexity of the economy, and the social and political goals of the government.

I prefer the mixed approach. At the macro level, we need state planning and regulation to ensure that the resources are allocated properly to the needs of society. At the micro level, we need the free market to determine the correct prices and give choice to the individuals to pursue the opportunity. 

Without regulation, the big business are able to use their market power to extract the maximum profits at the expense of individual consumers.

Without planning, the available and scarce resources may be mis-allocated, leading to oversupply and wastage. 

Tan Kin Lian 

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