Elements of Americas market economy in a global setting Essay

Mankiw (2006) characterize a market economy as an economic system where the production and distribution of goods and services through free markets and price systems (p. 7). The amounts of products produced are not pre-determined. At the same time, the amount of goods that will be used is not restricted but bound by market forces. Thus, producers and consumers through the interaction of supply and demand create the market by which products and services are consumed and used. The U.  S. is considered as the icon of this market system which is primarily based on Adam Smith’s capitalism (Rothbard, 2004). To fully understand the mechanism of a market economy, an understanding of its key elements is essential. Some of the key elements that will be discussed through this paper are property rights, competition, and profit. To facilitate this task, discussions will be based on the context of the U. S. market economy. The first element for discussion is property rights. Under the U. S. Constitution, property rights provide the owners of a real, personal or intellectual to exercise ownership, control and sovereignty over their proper (pp. 166-170). Thus, owners are able to utilize the property as they want to, use to gain benefit and protect it from harm. They have the right to benefit from it or from its use. The only constraint with the practice of these rights is that they should contravene any law or inhibit the rights of others (Mankiw, 2006). Competition is described to be the rivalry of individuals or parties because of common or dependent interest (p. 699). In a free market, Rothbard (2004) suggests that competition is the means by which markets determine which suppliers are best to meet demands. Similar to theories on evolution, the process of competition is a means to ensure quality. Thus, competition ensures that consumers are able to get the best product available. However, Rothbard also points out that competition is also a means of controlling the market internally or externally (p. 12-113). Profit is considered the ultimate goal of any economic enterprise. From an economic perspective, profits can be realized when revenues exceed the total cost of inputs (Mankiw, 2006, pp. 271-272). It is achieved when consumers have the capacity to buy a product at more than cost of suppliers’ production. In a simplistic model, profit is what is gained from using various economic resources. Thus, suppliers will continue to want to produce the product because of the economic incentive of its consumption.