The market system of the economy. Market structures: types and defining features

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

A market economy can function within the framework of several models at once, which in some cases have rather dissimilar features. What criteria can predetermine the corresponding difference? Which of the models are most common in the concepts of modern theorists?

Signs of a market economy

The market system of the economy is usually characterized by the following main features: the predominance of private property in the funds of enterprises, freedom of competition, limited interference of authorities in economic processes. This model assumes that companies, striving to achieve the highest profitability, maximize their efficiency, largely in terms of customer satisfaction. One of the key mechanisms of such a phenomenon as the market system of the economy is the free formation of supply and demand. It predetermines, first of all, the level of prices for goods, and hence the volume of capital turnover. The selling price of the goods is also an indicator that reflects how optimally the ratio of supply and demand is built.

Market economy: theory and practice

The above features that characterize the market system of management are set out by us at the leveltheories. In practice, the very optimal balance of supply and demand, according to many experts, is not very common. The markets of many countries, which seem to be characterized by complete freedom in terms of entrepreneurship, do not always create an environment where businesses have a truly equal opportunity. Within the framework of the national economies of the developed countries of the world, according to a number of experts, oligopoly models may develop, or monopolistic tendencies may appear.

Thus, the market in its purest form, one way or another, may tend to transform from a highly competitive environment with free pricing to a system where prices are set by the largest enterprises, they also influence demand and consumer preferences through advertising, propaganda and other resources. The market economy system is not as self-regulating as it may sound in theory. At the same time, it is in the power of state institutions to bring its properties as close as possible to ideal models, which are described in theoretical concepts. The only question is how to correctly build a market regulation system.

Stages in the development of a market economy

We can try to study the possible options for the influence of the state on a free economy, starting with the study of historical models of the functioning of the relevant economic systems. What can be the periodization of the formation of the market? Experts believe that the development of the economy (if we talk about the models that have formed today in developed countries) took place within four main stages- the so-called classical capitalism, the period of mixed economic systems, as well as socially oriented market models.

Let's start with classical capitalism. Historians believe that this system functioned for quite a long period - from the 17th century to the first decades of the 20th century. The main features of the relevant type of market were as follows:

- predominantly private ownership of basic production resources;

- practically free competition, easy entry of new players into the market;

- minimum obstacles to the direction of capital flows;

- the predominance of small and medium-sized producers, their relatively weakly expressed consolidation;

- underdevelopment of labor law;

- high volatility in pricing (influenced by supply and demand);

- minimum speculative component in terms of buying and selling shares;

The state practically did not interfere in the development of the economy at this stage. Classical capitalism has long been a fairly successful model. Thanks to competitive mechanisms, enterprises actively introduced the achievements of scientific and technological progress, improved the quality of goods and services. However, by the beginning of the 20th century, classical capitalism no longer fully met the needs of a developing society. This mainly concerned aspects of social security. The fact is that one of the inalienable signs of the capitalist market is crises that arise as a result of an imbalance insupply and demand, mistakes or deliberate actions of market players aimed at destabilizing some segments of the economy in order to make a profit. As a result, an arbitrator appeared on the business arena - the state. A so-called mixed economy was formed.

Its main feature is the significant role of the public sector in business, as well as the active intervention of the authorities in the development of the market. Mainly in those segments that required the investment of significant resources - transport infrastructure, communication channels, and the banking sector. State intervention assumes that a competitive market will still be present and characterized by freedom of relations, however, within the limits that are determined at the macro level, that is, entrepreneurs will not be able to set too low or high prices in a monopoly manner, save on staff salaries or take actions in their interests that can harm the national economic system. In a mixed economy, entrepreneurs have become more willing to unite - in holdings, trusts, cartels. Forms of collective ownership of private assets began to spread - primarily in the form of shares.

From capitalism to social orientation

The next stage of economic development is the emergence of socially-oriented economic systems. The fact is that under pure capitalism and a mixed model, the principle of maximizing profit for the business owner, the priority of investing in assets, still prevailed in the activities of enterprises. However, over time, market players have becomerealize that it is more expedient to prioritize other values. Such as, for example, social progress, investment in talent. Capital has become a derivative of these components. The social market economy also retained a competitive market. However, the criterion for leadership on it was not only capital, but also the social significance of the company's actions. Relatively speaking, not only the one with higher revenue and profitability is considered a successful business, but the one that has played a significant social role - for example, created a product that changed people's preferences and made their life easier.

The modern economy of most developed countries of the world, as some experts believe, in general, has signs of "sociality". At the same time, there are significant differences between the economic systems of different countries due to national specifics, business traditions, and foreign policy features. In some states, the economy may have a significant bias towards "pure capitalism", in others it may be more like a mixed model or have a very pronounced "sociality".

Economic and social order

There is an opinion that the modern economy of developed countries functions in such a way as to provide an optimal balance between the priorities of business, government and society. The interaction between these areas, as a rule, is expressed in ways of solving the problems that the relevant subjects face - entrepreneurs, authorities,citizens. They all strive for some order. Experts identify two main varieties of it - economic and social. Consider their features.

The economic order is a set of institutions, as well as norms that regulate the functions of the economy, the course of economic processes. The main areas of regulation here are property rights, currency and monetary policy, competition, and foreign economic cooperation. The social order is, in turn, the institutions and norms that affect the state of society as a whole and its individual groups, the relationship of people among themselves. The main areas of regulation in this case are the sphere of labor, social assistance, property, housing, and environmental law.

Thus, the economic system of a socially oriented type combines the priorities of the main subjects involved in the formation of both economic and social order. In the first case, the leading role is played by business (with the regulatory participation of the state), in the second case, by the state (with the auxiliary function of entrepreneurs). Society is the subject that dominates both types of orders. That is why the economy is called socially oriented.

About market structures

Despite the significant role of the state in modern economic systems, as well as its significant control over observance of the interests of society, the main driving force that determines growth is business. Entrepreneurship of individuals predetermines the introduction into everyday liferesults of technological progress. In many ways, it is business initiatives that influence the creation of new jobs, and in some cases even the success of the state's foreign policy. Without entrepreneurs, the authorities and society would be unable to build an efficient and competitive national economy.

Power is exercised through state institutions, society operates within the social. Business, in turn, relies on various market structures. What do they represent, according to modern theoretical concepts? What are the characteristics of market structures?

Let's start with a definition of this term. One of the most common sounds like this: a market structure is a set of features and characteristics that reflect the functioning of the economy as a whole or some of its industries in particular. Depending on what exactly this or that sign represents, market models are determined. What are they? Based on the methodological approaches established in modern Russian economic theory, there are three main market models: perfect competition, monopoly, oligopoly. Some experts tend to single out another model. This is the so-called monopolistic competition.

Another definition of the term, which is found in the expert community, implies a slightly different reading of it. In this case, we are talking about "market structures" as characteristics of the elements and subjects of thoseprocesses that take place in the economy. These can be, for example, the number of sellers, the number of buyers, as well as factors that form barriers to entry into any of the segments.

Market structures are a set of properties of the economic environment within which enterprises operate. This can be, for example, the total number of companies registered in the industry, industry turnover, the number of potential customers or buyers. The characteristics of the respective structures can influence the equilibrium in the market in terms of supply and demand. A set of a certain kind of indicators may indicate which of the four market models is functioning at a particular moment - at the level of the national economy, region, or, possibly, a particular locality. But, as a rule, economists calculate a certain average set of parameters to determine the properties of the nationwide economic system.

Monopolism

What characterizes the monopolistic market and market structures of the corresponding types? First of all, this is the presence of a rather narrow group of producers of a resource that allows them to influence the general situation in their segment of the economy (or at its national level as a whole). A number of experts call this kind of instrument "market power", the holders of which are monopolies - as a rule, these are large businesses or holdings. Depending on the degree of involvement in the economy of the authorities, they can be private or public. As for monopolistic competition, one of the formsmarket that complements the three main ones, then it assumes that businesses that are not part of the structures of "market power" still have a chance to influence prices. In practice, this can be seen at the level where the business operates. If this is, relatively speaking, a small grocery store, then it can influence the price of certain groups of goods in its area or street. If we are talking about a network business, then the scale of influence on the selling price of products sold can be expanded to a city or even a region. That is, there is competition, but it carries monopolistic features. Equilibrium in the market is practically not formed here. Although, of course, the pricing policy takes into account local demand. At the same time, as the number of enterprises in the industry, in a city or in a particular area taken from it, grows, monopolistic competition and market structures corresponding to it can develop into a different economic model.

Oligopoly

Let's consider the signs of an oligopoly. This market structure is close enough to a monopoly. A number of experts believe that the second is one of the forms of the first. In any case, there are differences between an oligopoly and a monopoly. The first is formed by market structures, if we talk about them, implying elements of economic systems that are characterized by the frequent occurrence of precedents that reflect the presence in industries of several leading and, as a rule, large business structures. That is, under a monopoly, there is mainly one leading player who has concentrated "market power" in his hands. In an oligopoly they canbe several. At the same time, cooperation between them may not necessarily imply price management. On the contrary, within a market structure such as an oligopoly, competition can be quite pronounced. And, as a result, the formation of the selling price of goods is completely free. A striking example is the confrontation in the IT market of giants of the level of Samsung, LG, SONY. If any of these companies were characterized by monopoly characteristics, then the price of the corresponding devices would be dictated by it. But today we have a fairly competitive, as experts believe, market of electronic devices, the unit price of which in recent years, if even growing, then, as a rule, not outstripping inflation. And even sometimes it decreases.

Perfect competition

The opposite of monopoly is perfect competition. Under it, none of the subjects of the economic system has the so-called "power of the market." At the same time, the possibilities for consolidating resources for the purpose of subsequent joint control over prices are usually limited.

Basic market structures, if we understand them as components of economic processes, are characterized in perfect competition by signs that are significantly different from those characteristic of monopoly and oligopoly. Next, we will consider their ratio for each of the models of economic systems.

Comparison of market structures

We have studied the concept of market structure. We saw that the interpretation of this term is dual. First, under"market structure" can be understood as such a model of the market - a monopoly or, for example, an oligopoly. Secondly, this term may mean a characteristic of a subject participating in economic processes. We have given several typical options, if we talk about modern economic concepts: the number of companies present on the market or in a separate segment, the number of buyers, as well as barriers to entry for both.

The most important thing to note is that both interpretations of the term can closely overlap. How? It will help us to understand the mechanism of interaction of models or elements that make up market structures, the table that we will now compile.

Market structure as a characteristic of an element of the economic system/As an economic model	Monopoly	Oligopoly	Perfect competition	Monopolistic competition
Number of enterprises in a segment or national market as a whole	One host	Multiple hosts	Many with equal status	Multiple with equal status
Number of buyers or customers	Usually a lot of	Many	Many	Usually a lot of
Barriers to market entry for entrepreneurs	Very significant	Significant	Minimal	Strong
Barriers to entry for buyers	Minimal	Not available	Minimized	Not observed

Such a visualization will allow us to more clearly see the difference between the corresponding models of economic systems - on a national or more local scale. At the same time, it should be noted that if we are talking about the economy of a city or region, it can be characterized by features that make it different from those for other settlements. And in this case, it will be quite difficult to unambiguously determine which model is closer, in turn, to the national economy.