A Mixed Economy: The Role of the Market
The
Private businesses
produce most goods and services, and almost two-thirds of the nation's total economic output goes to
individuals for personal use (the remaining one-third is bought by
government and business). The consumer role is so great, in fact, that the
nation is sometimes characterized as having a "consumer economy". This emphasis
on private ownership arises, in part, from American beliefs about personal
freedom.
Americans believe supply
and demand determine the prices of goods and services. Prices tell businesses
what to produce. If people want more of a particular good than the economy is
producing, the price of the good rises. That catches the attention of new or
other companies that, sensing an opportunity to earn profits, start producing
more of that good. On the other hand, if people want less of the good, prices
fall and less competitive producers either go out of business or start producing
different goods. Such a system is called a market economy.
Americans have
generally believed that some services are better performed by public rather than
private enterprise. Our government is primarily responsible for the
administration of justice, education, the road system, social statistical
reporting, and national defense. In addition, government often is asked to
intervene in the economy to correct situations in which the price system does
not work. It regulates "natural monopolies and it uses antitrust laws to control
or break up other business combinations that become so powerful that they can
surmount market forces. Our government also provides welfare and unemployment
benefits to people who cannot support themselves. It pays much of the cost of
medical care for the aged and those who live in poverty. It regulates private
industry to limit air and water pollution. It provides low-cost loans to people
who suffer losses as a result of natural disasters. It has played the leading
role in the exploration of space.
In this mixed economy,
individuals can help guide the economy not only through the choices they make as
consumers but through the votes they cast for officials who shape economic
policy. Recently, American consumers have voiced concerns about product safety,
environmental threats posed by certain industrial practices, and potential
health risks citizens may face. Government has responded by creating agencies to
protect consumer interests and promote the general public welfare.
The