> Imagine that an alien arrives on planet earth and asks you "what > is a market?" What kind of economic system would count as a "market"? > Fabio
We can cut through the fog by first defining a market in its purity: A pure market economy exists where all economic activity is voluntary for all persons in the economy. There are neither restrictions nor imposed arbitrary costs on peaceful and honest human action. In a pure market economy, there is free trade, with no taxation of labor, capital, or goods. Restrictions can be enacted if they are clearly necessary for the military defense of the country, especially during times of war. Government revenues are derived from user fees, fines, and rentals. A pollution tax, for example, is not an intervention, but rather prevents or compensates the private imposition of damage to others. Governmental interventions, whether restrictive regulations or taxes, create a mixed economy, a mixture of market and government intrusion. The economies of today are thus mixed economies with skewed markets, markets whose prices and profits are distorted by taxes, subsidies, and restrictions. To understand the market, we need to differentiate a pure market from a market skewed by intervention. Fred Foldvary ===== [EMAIL PROTECTED] __________________________________________________ Do You Yahoo!? Yahoo! Health - your guide to health and wellness http://health.yahoo.com
