A social and economic system in which
prices are fixed by the law of supply and demand rather than by a government or other body. In its pure form, a market economy is an economy absent of government subsidies, incentives, or regulations. A market economy contrasts with both a planned economy and a mixed economy. No economy is a complete market economy: most countries claiming to have market economies in fact have a market economy combined with greater or lesser government
regulation, sometimes called a social market. Proponents of a market economy argue that it is more
efficient than any alternatives, promotes fair
competition between its participants, and rewards skill and hard work. Critics allege that a market economy perpetuates class differences and rewards ruthlessness over actual labor. Milton Friedman, Friedrich Hayek, and
Ludwig von Mises were three major 20th-century proponents of the market economy. See also:
Capitalism,
socialism,
John Maynard Keynes.