Markets cannot emerge without a conscious plan to create them’. Discuss.

This cursory outline of the economic system and markets, taken

separately, shows that never before our own time were markets

more than accessories of economic life. As a rule, the economic system

was absorbed in the social system, and whatever principle of behavior

predominated in the economy, the presence of the market pattern was

found to be compatible with it. The principle of barter or exchange,

which underlies this pattern, revealed no tendency to expand at the

expense of the rest. Where markets were most highly developed, as un-

der the mercantile system, they throve under the control of a central-

ized administration which fostered autarchy both in the household of

the peasantry and in respect to national life. Regulation and markets,

in effect, grew up together. The self-regulating market was unknown;

indeed the emergence of the idea of self-regulation was a complete re-

versal of the trend of development. It is in the light of these facts that

the extraordinary assumptions underlying a market economy can

alone be fully comprehended.

A market economy is an economic system controlled, regulated,

and directed by market prices; order in the production and distribution of goods is entrusted to this self-regulating mechanism. An economy of this kind derives from the expectation that human beings be-

have in such a way as to achieve maximum money gains. It assumes

markets in which the supply of goods (including services) available at

a definite price will equal the demand at that price. It assumes the

presence of money, which functions as purchasing power in the hands

of its owners. Production will then be controlled by prices, for the

profits of those who direct production will depend upon them; the

distribution of the goods also will depend upon prices, for prices form

incomes, and it is with the help of these incomes that the goods produced are distributed amongst the members of society.

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