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Encyclopedia > Marketization
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Definition

Marketization essentials include deregulation of economic controls, privatization of industries, and freeing wages and prices from government influence. These simple steps, it is argued, will lead to the creation of a functioning market system. Marketization is two-fold, but at its very core, Marketization is simply seeking market based solutions for social, political, or economic problems.


1. The marketized solutions of government and market externalities (seeking market based solutions to problems).


-Here the government seeks to solve market and government externalities with market based solutions rather than government based regulations while. For example the market externality of pollution could be solved by the government selling pollution permits to individuals, groups, and corporations thus allowing the market to "see" the information and "realize" the harm by allowing the market to transmit pollution costs to society.


2. The marketizing of government agencies and branches (competitive federalism, limited government).


-Given special interests, simply electing politicians is not sufficient for the government to be held accountable to the people. In the market businesses are accountable to the people because of competition. Marketizing seeks to make government agencies and branches competitive to one another where government branches and agencies are absolutely necessary (ie remaining agencies and branches not privatized or liberalized away). Governments that must compete in a "market" will become more efficient and more accountable to the people. For example, a voucher system for public education would make public schools compete with one another thus making them more accountable and effecient.


Marketization and the World...The Theory

Critics of globalization, privatization, and liberalization have deemed that it is unworkable without major government regulations to balance the forces involved. Free Market thinkers like Hayek, Friedman, von Mises, or the scholars within the Cato Institute, believe markets can work with far less government regulation. As they see it, the combination of liberalization, privatization, and marketization ensure that globalization fulfills the promises of peace, prosperity, and cooperation that its liberal scholars and philosophers have promised. Without marketization, government created externalities can distort the information available to the market which in turn makes the market not work as well as it could. This can result in stagnation, higher unemployment, recessions, or even depressions. Marketization is simply the discriptive term for the government helping to put information back into the market to solve externalities rather than regulating to solve externalities. Friedrich Hayek Friedrich August von Hayek (May 8, 1899 – March 23, 1992) was an economist and social scientist of the Austrian School, noted for his defense of free-market capitalism against a rising tide of socialist thought in the mid-20th century. ... Friedman is a popular surname. ... von Mises stress in two dimensions Von Mises stress, , is used to estimate yield criteria for ductile materials. ... The Cato Institute is an influential libertarian non-profit public policy research foundation (think tank) headquartered in Washington, D.C. The Institutes stated mission is to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets, and... In general, liberalization refers to a relaxation of previous government restrictions, usually in areas of social or economic policy. ... Privatization (sometimes privatisation, denationalization, or, especially in India, disinvestment) is the process of transferring property, from public ownership to private ownership and/or transferring the management of a service or activity from the government to the private sector. ... Globalization is the changes in societies and the world economy that result from dramatically increased international trade and cultural exchange. ...


Without either three of these key ingredients free market theorists believe, globalization cannot solve conflicts, promote cooperation among states and individuals, and work to reduce poverty in the world. Free market advocates believe that in order for the system to work you must make these reforms immediate and complete.


Examples of Marketization

- Milton Friedman offers examples of what marketized government solutions can look like. Friedman's proposed education voucher system promotes competition between public schools (and private) thus creating a market based solution. Milton Friedman (born July 31, 1912) is a U.S. economist, known primarily for his work on macroeconomics and for his advocacy of laissez-faire capitalism. ...


See Also


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