What Is a Market Model?

The so-called perfect market economy is the symmetry of norms and evidence, the symmetry of control and freedom, the symmetry of fairness and efficiency. The market economy is full, not full freedom, full, not full competition. ^[1-2]

Market economy model

Complete freedom is freedom where efficiency is not fair, or efficiency is a priority, and freedom is anarchic freedom. Full freedom is freedom centered on equality and under the constraints of equality. fully

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2Provide the power and pressure of economic development

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Market economy model

Neoclassical economics is popular in China in recent years and is regarded as the Bible by mainstream economics. Its well-known market adjustment principle is the so-called "invisible hand" theory. The core idea of this theory is: In an ideal market system, supply and demand are flexibly adjusted and automatically balanced through price fluctuation mechanisms. When the supply is insufficient, commodity prices rise, and high profits stimulate investors through price signals, prompting them to transfer resources, labor, and technology to shortage sectors, so supply increases and demand is met. When supply exceeds demand, commodity prices fall, and low profits and low-price signals prompt investment to shift resources, labor, and technology, reducing production, so supply and demand return to equilibrium. At the same time, in the process of meeting supply trends, fierce market competition will naturally eliminate low-efficiency investors and naturally adjust the economic structure to maintain high production efficiency. Under the adjustment of the "hand" of this invisible market, the economic structure and system are automatically adjusted and operated, and resources are most effectively allocated. There will never be a long-term situation of overproduction and insufficient supply. This has always been a dream of vulgar economics, but it is purely bullying. The occurrence of crisis, that is, the occurrence of business cycle fluctuations and shocks, is directly related to the nature of the market economy. As long as it is a market economy, it is impossible to get rid of this cyclical crisis mechanism.

Market economy model overproduction

This theory of market autonomy looks like a very beautiful economic "model". It has been recommended to all socialist countries by the West for decades, and compared with the socialist planning system, it leads to the following conclusions:

The shortage of goods under the socialist system is due to the ineffectiveness of the price mechanism. Because the supply sector relies on centralized and directive decisions, it cannot respond to market demand in a timely and flexible manner based on price signals. Low efficiency of investment. Therefore, the goals of socialist reform are political liberalization and market economy. As a theoretical model of the market economy, and economic reform programs designed based on this model, all socialist reforms in the past 50 years have been guided in the direction.

Introspecting this set of economic theories today, we are surprised to find that the theoretical model is simple and naive. In fact, if this model is to be established, it must rely on at least three assumptions: First, the producers need to make timely and flexible investment transfers based on price signals without cost. The second is that the productive structure of the established society is flexible. Third, resources and technical resources that ensure the possibility of investment transfer and productivity transformation can be supplied indefinitely.

Even if market demand gives investors a huge and tempting signal through prices and profits, is it possible for him to immediately abandon or rebuild all the equipment and technology he already owns, abandon his existing workers, and divert funds to another profitable one? Production department? What is the economic cost of this transfer? Is it guaranteed that investment transferers will make a profit?

Second, investment transfer takes time. The fact is that the transformation of production capacity always lags behind changes in demand, and the time from investment to recovery of investment and profits is often longer than the period of strong demand.

Market demand is always changing. When investors purchase equipment, hire workers, introduce technology to build new production lines, and form new production capabilities, the demand for flashing high profits in the market may have been met and changed. In this case, the investor's entire production allocation and production capacity will once again become excess capacity. In this case, such a production line that has been allocated huge resources and labor will become a social waste.

Therefore, according to its nature, the market economy naturally has the possibility of macroeconomic out-of-control, that is, excess productivity.

Market economy model economic crisis

The market-regulating economy seems to be efficient at a micro-level (to individual consumers). From a macro perspective (for the whole society), it is often inefficient, and supply and demand imbalances and cyclical economic crises are bound to occur. In fact, the possibility of such a cyclical economic crisis is already implicit in that ideal market model. That is, when supply exceeds demand, prices fall, profit margins drop, and even no profit, causing investment to automatically exit the production area of this sector.

But this kind of overinvestment and excess productivity, the so-called "structural adjustment," in reality, imply serious and terrible social costs. Commodity backlogs, factory bankruptcies, bank failures, and laid-off workers are the inevitable result of the so-called price signal drop in economics and the decline in profit margins to automatically adjust supply. In a free market economy, a crisis must pass through if capital is to be transferred from one industrial sector to another.