What is meant by a commodity economy What is meant by a market economy Details

What is meant by a market economy? About one hundred economists can come up with more than one hundred and one ways of saying it. Some say that a market economy is an economy of private ownership; some say that a market economy is an economy of value. Others say it is an economy of spontaneity, a competitive economy, an economy of survival of the fittest, an economy of credit, an economy of the rule of law, and so on.

It should be said that all these statements have some truth. Including the "private ownership" argument. However, these statements are like "blind men groping for an elephant", they only touch a part of it, they do not have the power of generalization.

What is a market economy? It is very simple. A market economy is an economy in which exchange takes place on the basis of the principle of equivalence.

The fundamental basis for the existence and development of a market economy lies first of all in the generalization of the division of labor. We say that without industrialization there can be no market economy. Why? Because it is only industrialization and large-scale machine production that can create the material basis for the universal division of labor in society. The natural economy of men farming and women weaving does not need exchange. At most, two people in a family would exchange products. In the age of agricultural civilization, a woman in the countryside could not afford to feed her family with shoes even if she had to work in the dark every night to make the soles of her shoes. With machine production, one worker could sew 100 pairs of shoes a day. Nowadays, the process has been improved, and instead of sewing, the shoes are glued. One worker can glue 1,000 pairs of shoes a day. Of course, if he produces so many shoes, he will not wear them himself, or give them to his family, or give them to his boss. What did he do with them? For sale. It's an exchange.

The division of labor is not the only basis for a market economy. The exchange caused by the division of labor is not the only way to sell. In a planned economy there is a division of labor, but a great deal of the product is "planned". It is not really for sale. This is because the traditional theory of the "one big, two publics" system is that we are all members of the same family, so there is no need for us to calculate so clearly. "The meat rots in the pot. Whoever has more and whoever has less belongs to the "state", right? Or is it owned by the "laborers*** together"? At the beginning of the reform process, we began to try to break up the "big pot". However, at that time, the "big pot meal" mainly referred to the egalitarian distribution system in enterprises, where "good or bad work is the same". In fact, the biggest "big pot of rice" under the original system is not in the egalitarian distribution, but in the denial of the principle of market transaction of equal exchange.

Exchange in a market economy is the exchange of "brothers and sisters". The two parties to the transaction must calculate how much, and must protect their own interests. We all have the experience of buying food at the market and bargaining with the vendors. If the price of turnips and cabbages is 10 cents higher, the vendor gets 10 cents more. If the price is one cent cheaper, the buyer's interest is one cent more. No one's money is free.

Please note that this behavior of "having to defend one's own interests" in exchange is very important. It is, arguably, the fundamental starting point for all the laws of the market economy. In all of economics, there is in fact one unproven, ****ing assumption. That assumption is that people are motivated to avoid harm.

Our reform practice has clearly proved that the public ****interest and ****same ****interest must be based on individual interest. The denial of individual interests is, in fact, the denial of public **** interests. Before the rural reforms in China, the people's commune practiced the "work-sharing system". Theoretically, whoever did the work led to an increase in the value of the same points. This "work-point system" linked everyone's interests together, right? But practice has shown that this system design, which denies individual interests, has led to the peasants' revolt of "work without effort". Endless political campaigns and repeated education on "selflessness" did not help. The result was that everyone suffered the same poverty, and no one's interests were safeguarded. At the end of the 1970s, one of the first reforms we carried out was the "division of land into households", recognizing the individual interests of peasants. What was the result? The result was that in 1984, during the 35th anniversary of the founding of the People's Republic of China, when Deng Xiaoping paraded through Tiananmen Square, peasants across the country sang "On the Fields of Hope".

We don't want to get involved in a meaningless debate about whether people are selfish. I think it is a paradoxical proposition like "Can an omnipotent God ask a question that even he himself cannot answer? Paradox is a study in itself. The study of paradoxes is also interesting. As we shall see below, everything in a market economy is full of paradoxes. For example, "decentralized ownership allows for more efficient pooling of resources". But this "selfishness" debate is about taking a philosophical proposition about the nature of human beings and applying it to real, vivid socio-economic life. We cannot simply interpret the question of selfishness, which has been so frequently asked, as a mere aspiration for an ideal society. This is typical metaphysics. There is a "reductive method" of argumentation. For example, we can ask, "We are all going to die, so shouldn't we avoid death and seek life?

In fact, the report of the 16th National Congress of the Communist Party of China (CPC) has already answered this question. "The report of the 16th National Congress says that one cannot distinguish between the politically advanced and the politically backward on the basis of whether a person has property or does not have property, or whether he has a lot of property or a little property. I think we can interpret this statement theoretically to mean that we cannot differentiate between politically advanced and backward people on the basis of whether they have self-interested motives to seek benefits and avoid harm. "The report of the 16th National Congress says that the key is to look at how people get their property. In our case, the key is to have rules for avoiding harm.

As we all know, all resources are limited, and economics focuses on the optimal allocation of limited, or scarce, resources. Since resources are limited and opportunities are limited, competition arises when people want to make the best use of them to avoid harm.

There is insufficient supply and everyone wants to buy, so there is competition on the demand side. When there is sufficient supply and insufficient demand, sellers want buyers to prioritize their products. There is thus supply-side competition. The bargaining between supply and demand manifests itself as competition between supply and demand. In fact, competition is omnipresent in a market economy. It manifests itself in many different ways. Not only is there competition between similar industries and products that satisfy the same kind of demand, for example, there is competition between publishing houses and television stations, but there is also competition between firms producing completely different products. This is because it is possible for two firms or industries to use the same resource. For example, oil can be used both as a fuel and as a chemical. And oil is finite. Technological substitution, functional substitution, and utility substitution all lead to competition.

In the reform process of the past few years, we have become more familiar with the existence of competition. However, I am afraid that there are still different views on the evaluation of competition. The reason is that competition inevitably involves the issue of fairness. Some people even moralize competition in a market economy, saying that to admit that people will "tend to benefit and avoid harm" already smacks of "suppressing the good and promoting the bad", but to advocate competition is not to advocate the evil theory of "the weak and the strong"? This is not a sinful theory that advocates "the strongest of the weak and the strongest of the strong".

You may recall that on the eve of the 2001 Spring Festival, the State Planning Commission held a hearing on the issue of "passenger train fare increases".

This hearing was in fact an attempt to solve the problem of optimal allocation of resources and the problem of fairness by means of price competition. In the case of the Spring Festival, do we have any other solutions? There are. For example, instead of raising prices, we can continue the practice of letting people queue up in advance, so that whoever gets the best deal will get it. But in this case, the cost of travelers queuing up all night, the cost of "backdoor" travel, and the cost of "ticket traders" making money by dumping the tickets all add up, and it can be said with certainty that the extra price paid by the demand side will be far greater than the price of the increase in train ticket prices. More importantly, as a demand-side measure, the extra price paid by travelers will directly contribute to future increases in rail supply, whereas the extra price paid by travelers in the "queuing" scenario will not contribute at all to increases in rail supply. For example, we could also use rationing in a planned economy. Each citizen would be issued a 500-kilometer railroad ticket, and they would be able to adjust the balance among themselves. This sounds fair enough, doesn't it? But can society bear, or is it necessary to bear, such a large cost of resource allocation? Moreover, it can be asserted that even if this proposal really works, the black market of "ticket certificates" will immediately flourish. Will travelers who really need to buy tickets really pay less?

Wouldn't we need to take care of the disadvantaged in the competition? And we don't need to be fair? Yes. This fairness can also be, and should be realized through price leverage. That is to increase the price of soft sleeper tickets and reduce the price of hard seat tickets. The actual price increases that have been implemented since then have proved to be the right thing to do.

When we say more price increases for soft sleeper tickets, is that a non-market-based unfairness? No. There is ample economic justification for the proposal.

There are two extremely important concepts in economics, one called "shadow price" and the other called "opportunity cost".

First, let's talk about the "shadow price". One of the reasons given by the Ministry of Railways for the price increase in the Spring Festival is that there is a "shadow price". In the case of train tickets, roughly speaking, the price sold by ticket sellers is the shadow price of the Spring Festival fare. Ticket sellers know that they can't make much money by destroying hard seat tickets, and the increase in price is very limited; what they can make money on are sleeper tickets. This is because of scarcity. This scarcity is not only manifested in the scarcity of sleeper tickets, but also in the strong purchasing power of those who buy sleeper tickets. The shadow price is the price that best expresses the degree of scarcity of resources. Since you, the Ministry of Railways, have put forward the rationale for the "shadow price", then we should follow the price difference shown by the "shadow price". The soft sleeper's "shadow price" is the highest, so the soft sleeper should go up more.

The opportunity cost. If you come to a lecture, you have to do less business. The loss of less business is your opportunity cost of listening to the lecture. If you want people to say that listening to this course is "worthwhile", you have to make people feel that the benefit of listening to this course is greater than your opportunity cost.

What is the opportunity cost of the railroad in the case of the Spring Festival? Let's assume that under normal circumstances the revenue from ticket sales is 10,000 dollars for both a hard seat car and a soft seat car. Now, due to overcrowding in the Spring Festival, more people are squeezed into the hard seats. Let's say 50%. If fares don't go up, a hard-seat car can already generate 15,000 yuan in fare revenue. But the soft seats can't be overcrowded, and the revenue is still 10,000 dollars. Do you think the railroad should consider hanging one less soft sleeper and one more hard seat, or raise the price of soft sleeper by 50%? Because at this point the opportunity cost of soft sleeper carriages has increased by 50%. A 50% price increase would equalize the opportunity cost of the soft sleeper with the opportunity cost of the hard seat. That's fair.

The hard seat is overcrowded with a 50% increase. That means that the space available to each traveler is greatly reduced. But the soft sleeper, that is, or a 50% increase in price, because there is no overcrowding, the traveler's enjoyment of the space has not been reduced. So should travelers on the soft sleeper pay more for having access to quality resources in a situation of imbalance of supply and demand? They should. In this example, if the hard seat price is not raised, it is not enough to raise the price of the soft sleeper by only 50%, it should be raised by 80% or even 100% in order to be reasonable and fair. If the hard seat price is raised, then the soft sleeper should go up even more.

This is a market economy. This is competition. What are the benefits of competition? There are three main benefits of competition. One is to optimize the allocation of resources. Improve the efficiency of the utilization of limited resources. The second is the survival of the fittest. The survival of the fittest is not only the allocation of resources to the more efficient dominant meaning, more importantly, constantly promote the society, the market and technology to move forward. Thirdly, it is to reduce social transaction costs. On many occasions, there is no need to hold a lot of meetings and discuss endlessly, and whoever offers the highest price will be sold to whom. Decision-making becomes very simple.

To figure out what a commodity economy is, we must first have a simple understanding of the basic form of social and economic operations. In the course of the development of human society, the basic form taken by social and economic operation is roughly of three kinds: (1) Producing by oneself what one needs and being self-sufficient, this form of economic operation is called natural economy. (2) The exchange of the products of labor produced by oneself with the different products of labor produced by others, so as to obtain what one needs, this form of economic operation is called the commodity economy. (3) The form of economic operation in which one obtains what one needs, though not self-sufficient, not through exchange but through centralized and uniform distribution by the central institutions of society is called a product economy. The natural economy is an economic form that corresponds to the extremely backward level of social productive forces. Commodity economy is based on the productive forces of socialized mass production, and is the most basic form of economy in the development of human society so far. The commodity economy has gone through different stages of development, and the market economy is the developed stage of the commodity economy. The product economy is based on highly developed productive forces and presupposes the consistency of economic interests of the whole society, and it is Marx's vision of the future ****productivist society.

The commodity economy has far-reaching effects on our studies, life and work. For example, a commodity economy requires people to be honest and trustworthy. In the final analysis, a commodity economy is a credit economy, and credit is the main theme of social morality in a commodity economy, and credit is the passport to win the general recognition and respect of society. The core of a commodity economy is "exchange", and the reason why millions of people who do not know each other willingly exchange the commodities they need across borders and provincial boundaries is because of credit. The development of the commodity economy also overcomes the ideology of sticking to the old ways, sticking to the old ways, narrowing one's vision and fearing change, and embodies the side that is conducive to the improvement of people's moral level. Of course, while the commodity economy has brought us positive impacts, it has also brought many negative impacts on social life because it believes in the principle of profit first. For example, under the impact of the commodity economy, people's quiet and peaceful state of mind in the past has been broken, and social changes have tested family and friendship, and many precious things have been lost, and family and friendship have become indifferent. Competition and commodity economy, almost making people trapped in the exhaustion of the chase and have no time to care, such as gold worship, egoism, moral relativism and other wrong pursuit of life appeared. At the same time, the pursuit of the ideals of truth, goodness and beauty is becoming more and more indifferent, as if people no longer believe in the sublime, no longer promote the spirit of altruism. In short, the impact of the commodity economy on us is all-encompassing.