Question

Advocates of a market orientation system argue that exclusive reliance on the visible hands of government will never bring spending under control. The missing component has been the invisible hand of the market pricing mechanism. Patients spending their own money have an incentive to control spending. Do you agree or disagree? Please support your argument.

Answer 1

Introduction:-

Systems in which economies should operate have long been debated by the world, and different countries adopt different methods to ensure their economy remains on track respectively.

For this, three approaches are very common in managing the economic resources of a country. These include Market Based Economies also known as Capitalist Economies, Socialist Economies and Mixed Economies. The basis of Market economies is that all resources should be controlled by free trade and demand and supply. The government in this case should have no control on central questions such as What to Produce, How to produce and in what quantity the production will be undertaken.

Socialist economies tend to be just the opposite in which these decisions are taken by the government alone. On the other hand, mixed ones are an amalgamation of both the concepts in which both the government and the forces of demand and supply interact in a common situation.

Case Specifics:-

The case, at hand argues at the need, for a market based system, which would in belief reduce spending. They believe that people will be more inclined towards saving more if marked based orientation can be established. In practice, however this is hard to achieve.

In my belief, a mixed economic system is the need of the hour across most kinds of countries. Market oriented systems create problems for smaller countries which are not yet developed. These countries see demand coming from only a small section of the society which have higher paying capacity. As a result of which the interests of a large section of the society gets ignored.

Further, in factors such as healthcare, which are of core importance to the government, some degree of intervention becomes necessary. Companies if given a free hand are more likely to increase the costs of healthcare which would reduce savings.

Healthcare expenditure cannot be controlled by demanding lesser. It is a necessity and the overall cost increases in case it is left in the hands of private market players this on the contrary would reduce savings.

Such examples can also be illustrated for other cases. Markets independently in my opinion can face trouble in managing themselves. For example the Recession of 2009, caused widespread issues for the United States and beyond and highly reduced savings and investment. Therefore government intervention is important in some cases in the economy and mixed approach of management is the best.

Please feel free to ask your doubts in the comments section.