Market Or Command Economy
The Netherlands runs off of a mixed economy. I believe this because the Netherlands economic system needs features of both the command and market based economies. In ownership, the Netherlands should should be run in the way of a Market economy. Although, it would make sense that the firms own some resources, private individuals or groups of individuals will own the resources. This will allow workers and business owners to be free in their own businesses, creating their own entrepreneurial opportunities in the country. Also in the Market system, the government should regulate free enterprise. As one of the top trading partners in the world, freedom to sell anything citizens would like and buy anything. This will create good trading relationships across the world. With free enterprise comes competition, Netherlands basing their economy off of trade needs competition to survive, by having competitive prices in the market, prices stay fair and competitive for the best goods or services available. Finally, as large trading partners the Netherlands needs a stable pricing system that can be flexible with change to maximize producers gain. Next, the Netherlands should use a command system to care for all of their objectives. This will create a communal objective that all people in the country will work for the common good of all citizens, which would create a sense of equal opportunities for all people. Overall, the government should use a mixed system to maintain good trading relationships, solve lending solutions, and aging population issues.
Below is a piece from s-cool.co.uk explaining the similarities and differences of Market and Command economic systems.
Market
Command
Below is a piece from s-cool.co.uk explaining the similarities and differences of Market and Command economic systems.
Market
- Ownership: Nearly all of the country's factors of production are owned privately. Although it might make sense to argue that firms own some of the resources, it is private individuals, or groups of individuals, who own the resources. They then rent them out to the firms so that they can produce the goods and services. Richard Branson is in charge of Virgin, but first and foremost he is a private individual who owns the majority of the shares. He could get someone else to run the company. This brings into play one of the government's limited roles. Through the legal system, the government must uphold the property rights of these private individuals.
- Objectives: Everyone in this system is motivated by pure self-interest. Consumers maximise welfare, firms maximise profits and the private individuals, who own the factors of production, aim to maximise rents (on land), wages (on labour), interest and profit (on capital).
- Free enterprise: Basically, firms can sell anything they want. They effectively respond to the consumers, who are allowed to buy anything that is sold by the producers. Workers can take on any job they want (this may seem obvious, but wait and see what happens in the command economy).
- The level of competition: Very high. Basically, it is assumed that nearly every market is a perfectly competitive one, with numerous buyers and sellers and no barriers to entry or exit. Firms are competing desperately for customers and the consumers are competing with each other for the goods on offer.
- The pricing system: Nearly all markets are perfectly competitive. You may remember that in these circumstances, the price mechanism allocates the economy's resources. The reason why it is called the price' mechanism is because the price acts as a signal and an incentive for producers to act in the required way so as to maximise their gain, which, in turn, optimises the allocation of resources in the whole economy.
Command
- Ownership: Nearly all of the country's factors of production are owned publicly by the government (or the state). The only factor over which the government does not have total control is labour, but as you will see, they certainly have indirect control over the workers.
- Objectives: The complete opposite of the pure self-interest of the free market system. No one (in theory) thinks of himself (or herself). Consumers, workers and the government are all assumed to be working for the 'common good'. This system is often associated with communist Soviet Union (as it was before 1989), but the fascist Hitler ran a 'planned' economy, albeit rather dictatorially. I'm not sure that system ended up being for the common good! Also, democratic countries often attempt a less severe form of planned economy via socialism.
- Free enterprise: There is none.
- The level of competition: Very little. Certainly, in the former Soviet Union, black markets used to develop as a result of shortages in the shops. There would be competition between these racketeers, I suppose. But in theory there was no competition.
- The pricing system: There is no competition, so there is no price mechanism. The authorities set the prices. It is because they set prices at low levels to make sure that everyone can afford the goods that excess demand occurs causing long queues for goods outside shops. Another inevitable consequence is the creation of black markets.
- The planning system: This is an extra characteristic of the command economy. The other five has tried to follow the five given in the 'free market economy' section. As the government runs the system, they have the job of planning how all the resources should be used. They have to decide what should be produced and in what quantities. They must decide how the goods are to be made. What labour should be used and where? What techniques of production shall we use? How will the completed goods be divided between the workers (or consumers)? The key point is that they directly set the output levels and price levels.