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The advantages of a free marketeconomy (and the disadvantages of command economies)1.Efficiency. Free market economies are very competitive. Most of their industries are assumed to be perfectly competitive, and so they will use their resources wisely and efficiently to make them more profitable. Ultimate decisions about what to produce are made by the people who will actually consume the goods. Planners in a command economy are less likely to make the correct decisions across the whole economy.2.Choice.Industries and businesses will produce whatever consumers are prepared to buy. Remember that the consumer is the sovereign, or has the final say. There are no other restrictions on what the firms can produce. It is of no surprise, therefore, that there will be a much larger choice of goods and services in a free market economy compared with a command economy. The planner in a command economy will be more concerned with making sure there are enough essential goods to go around rather than allocating resources efficiently between all goods.3.Innovation.Industries and businesses will always be looking to produce something new to get ahead of their competitors. Even though the government's role is very limited, one of its jobs is to protect the people’s rights to own property. This will include intellectual property rights through patents, or legal documents that give ownership to an idea to a person or group. Hence, there are incentives, or rewards, in the free market system for firms to be innovative and produce better quality products. Obviously there is no incentive for the planner in a command economy to be innovative. As long as they produce the essentials, the planners will be happy.4.Higher economic growth rates. History has demonstrated that economies with more market characteristics have higher growth rates and a generally wealthier population. The United States, one of the freer market economies in the world, is also the largest economy. In comparison, China’s economic growth rate was far slower when it was more of a command economy than what it is today as more of a mixed economy.
The advantages of a commandeconomy (and the disadvantages of a market economy)1.Strong, universal “safety net.” A command economy might not have enough incentives for the successful to make millions, but at least the strong government will try to make sure that everyone has their basic needs met. It will be a fairer economy, even though it is likely to be less successful overall. For many, the unequal distribution of income and large gap between rich and poor is thebig disadvantage of a free market economy. In a free market with very limited government, benefits tend to be low, the health service poor, and schools under-funded. If you start life with very little, and do not even get a good education, then there willbe very difficult to escape poverty.2.Quick decisions. Though it has a limited role, any government decision in a free market will take a long time, as the consumers’ and the producers’ often differing concerns must be considered. In a command economy, decisions are made by central planners in order to maximize group benefit. If there is a housing shortage, government planners can order more to be built immediately. In a market economy, if there is no incentive (other than allowing more people to have shelter), producers might not respond to the apparent need right away or at all.3.Regulation of negative actions.A true free market economy will essentially lack any rules. Producers will be free to produce any goods imagineable (including things that can be harmful to humans or society, such as drugs), treat and pay workers however they please (assuming consumers don’t mind), and cause considerable damage to the environment (again, assuming it doesn’t bother consumers). Without incentives to prevent negative actions, individuals and/or groups can possibly make decisions that can harm or take advantage of others or the environment. More government control, which exists in a command economy, would attempt to prevent these actions by establishing firm rules and consequences for their violation.4.Social services.If individuals in a market economy can’t afford healthcare, education, or even basic services such as water or electricity, then they go without them. This can problematic, obviously. In a command economy, all services are guaranteed and produced by the central planners. Individuals would not need to consider how to pay for hospital visits, schooling (at any level), or other services.Adapted from: http://www.s-cool.co.uk/a-level/economics/free-market-v-command-economies/revise-it/which-system-is-best