While traditional market systems have been around for a long time, market systems seem to be the most popular system of today. Both of these systems help to regulate an economy, however market systems seem to be the most effective system in terms of what things are produced and how the economy runs.
The inherent nature of traditional market systems, while offering some unique advantages, nevertheless presents obstacles that result in its relative inefficiency. These market systems are based on traditional religious customs, habits or rituals of the past (citation needed). Farming, herding animals, or working in simple crafts and trades are all activities that are easily passed on to the next generation as part of this system (citation needed). And while such smooth generational transitions may be appealing at first glance, it is one of the only advantages to this economic system, and falls far short of counterbalancing the grave weaknesses of such a system. Among the serious disadvantages of traditional market systems is a lack of innovation due to strict traditions. For example, Inuit parents in Canada once taught their children survival skills like hunting. After a successful kill, the triumphant hunter would select the choicest cuts of the meat for him or herself, and only then would they return and share the excess meat with their tribe, thereby gaining a degree of honor in the eyes of the other people of the tribe (citation needed). Clearly, such an arrangement of affairs prevents the community from optimizing the overall consumption of goods, and monopolizes resources to the advantage of the skilled few.
In addition to the problematic what (or nature) of traditional market systems, the how of the traditional market process introduces several other challenges. The barter and trading of goods and services occurs without the influence of a common currency (citation needed). This introduces unnecessary friction in the transactions within an economy. Additionally, village elders or familial ancestors typically dictate the niche an individual will fill in an economy (citation needed). While such individuals may command the respect of many within the community and may have a degree of ability to effectively organize an economy, certainly no such group of individuals could possibly possess the almost omniscient power that would be required to match the efficiency of “the invisible hand” of the free market. These collectivizing forces in such an economy often create a stable, but lower level of lifestyle as individual self-interests are subjected to the illogical dictates of the group (last, date).
The nature of the free market system reveals a more simplistic and ingenious answer to the problem of organizing an economy. A free market is controlled by self-interested individual buyers and sellers (citation needed). This self-interest ultimately regulates the quantity of goods provided as well as the prices thereof. One way of looking at the competitive nature of the free market system is by understanding it in the context of an “election” (citation needed). People “vote” by buying goods or services. Almost anything can be produced in a free market economy as long as that product receives enough of these “votes” (citation needed). This encourages variety and innovation which trigger an almost Darwinian process whereby goods and services evolve in a way to promote the survival of the “fittest” good or service.
Much benefit is derived from the nature of the free market system as it is implemented. The income of an individual determines their spending and their production in a community. This allows for adaptations in the economy that most closely address the needs of individuals while not wholly ignoring the priorities of the collective group. Therefore, there is no central control that assumes control over quantities and prices—rather, the organization of the economy relies on “the unfettered interaction of individuals and companies in the marketplace” which consequently allow “individuals [to] choose how to invest their personal resources—what training to pursue, what jobs to take, [and] what goods or services to produce (Intelligent Scholar, such-and-such-a-year, p. #).” The genius of allowing individual demand to regulate the collective economy thus tends so equitably to the needs of both the individual and the whole that there is no need for extensive market planning by any individual. This furthermore expands individual liberties over government interference, and encourages individual freedom, talents, and goals. And while such a system can be unstable and can temporarily result in depressions, it has proven to be extremely adjustable and resilient to even the most traumatic of economic disasters (citation needed).
Because of this demonstrated supremacy of free market systems over that of traditional market systems, no country in the world “can be described as having a primarily traditional economy (Peaks, such-and-such-a-year, p. #).” The regulating mechanism of cash drives people from all over the world to create farmers markets and flea markets to employ telephones, bulletin boards, and the Internet, all in a collective quest for taking a bigger slice out of the ever-growing pie of the free market system (citation needed). And while shocking economic disparity still exists around the globe, the forces of the free market system are certainly better-equipped to grapple with the problem than the outdated methods of the traditional market system.