Market economy what Is a Market Economy?

Social market economy 
Main article: Social market economy 
The social market economy was implemented by Alfred Müller-Armack and Ludwig Erhard after World War II in West 
Germany. The social market economic model, sometimes called Rhine capitalism, is based upon the idea of realizing the benefits 
of a free-market economy, especially economic performance and high supply of goods while avoiding disadvantages such as 
market failure, destructive competition, concentration of economic power and the socially harmful effects of market processes. 
The aim of the social market economy is to realize greatest prosperity combined with best possible social security. One 
difference from the free market economy is that the state is not passive, but instead takes active regulatory measures.
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The 
social policy objectives include employment, housing and education policies, as well as a socio-politically motivated balancing 
of the distribution of income growth. Characteristics of social market economies are a strong competition policy and a 
contractionary monetary policy. The philosophical background is neoliberalism or ordoliberalism.
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Socialism 
Main article: Market socialism 
Market socialism is a form of market economy where the means of production are socially owned. In a market socialist economy, 
firms operate according to the rules of supply and demand and operate to maximize profit; the principal difference between 
market socialism and capitalism being that the profits accrue to society as a whole as opposed to private owners.
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The distinguishing feature between non-market socialism and market socialism is the existence of a market for factors of 
production and the criteria of profitability for enterprises. Profits derived from publicly owned enterprises can variously be used 
to reinvest in further production, to directly finance government and social services, or be distributed to the public at lar ge 
through a social dividend or basic income system.
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Advocates of market socialism such as Jaroslav Vaněk argue that genuinely free markets are not possible under conditions of 
private ownership of productive property. Instead, he contends that the class differences and inequalities in income and power 
that result from private ownership enable the interests of the dominant class to skew the market to their favor, either in the form 
of monopoly and market power, or by utilizing their wealth and resources to legislate government policies that benefit t heir 
specific business interests. Additionally, Vaněk states that workers in a socialist economy based on cooperative and self-managed 
enterprises have stronger incentives to maximize productivity because they would receive a share of the profits (based on the 
overall performance of their enterprise) in addition to receiving their fixed wage or salary. The stronger incentives to maxi mize 
productivity that he conceives as possible in a socialist economy based on cooperative and self-managed enterprises might be 
accomplished in a free-market economy if employee-owned companies were the norm as envisioned by various thinkers 
including Louis O. Kelso and James S. Albus.
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