Free Market Vs State Analysis

It has become clear that by studying the interactions between the states and the market but the two have some hold on each other. While Smith argues that the role of economy is to self regulate and promote competition and the role of the state is to protect the public stay removed from the market system, Marx believes that the states should act as a mediator in the markets where the market is dependent on the aggregate household behavior. Keynes argues that a free market without any intervention by the state fails in several aspects such as employment and distribution of wealth. He believes that the state should have some influence on the market, though minimal. With all these competing ideas it is difficult to discertain which method is correct, …show more content…
Instead of having a separate market and state, Marx argued that the market will not self-regulate and instead need a directing force so monopolies and trusts are avoid. If they are not avoided, monopolies and trusts will drive down competition in the market to the point where an entire commodity or service is controlled by a single firm. Marx consider the free market a state of anarchy within the economy where instead of benefiting households, the firms would attempts to gain complete control as to avoid any competition. Instead, Marx argued that if the state had control in regulating the market system, it would be doing its job of protecting the citizens by preventing monopolization of the economy. In this state of economy, Marx believed that the market would allocate labor and resources instead of the individual like in Smith’s capitalism. Instead of the individuals determining production and consumption, society as a whole, the aggregate household behavior, determined what was made and how much of it. Instead of division of labor being dependent on the individual, it is instead dependent on the market and what is needed at the moment. The market will always try to remain at equilibrium with required division of labor and the actual division of labor. With the market …show more content…
Keynes argues that while too much involvement by the state could be detrimental to the market, there was a unique relationship between the two. Keynesian economics theory states that there is a multiplier whereby for every dollar the government investment In the economy, will be multiplied, by the multiplier, and will generate more than one dollar in the economy. This theory argues that it 's not only are the state and the economy directly correlated with one another, but the economy cannot exist in its current state without government intervention. This theory suggests that for Keynesian capitalist economies, supply and demand, wages, specialization, and utility are relatable to the monetary policies of the government where the government has some hand in controlling these economic factors. This allows for the economy to be manipulated by a state 's governments and, theoretically, economically devastating event such as depression or recessions can be controlled, along with expansions in the