Free Enterprise Economy or Government Controlled Economy?

Free Enterprise Economy or Laissez Faire system

This economic system works on the principle of Laissez Faire system, i.e., the least interference by the government or any external force. The primary role of the government, if any, is to ensure free working of the economy by removing obstacles to free competition.
A free Enterprise Economy is characterized as follows:
• Means of production are privately owned by the people who acquire and posses them
• Private gains are the main motivating and guiding force for carrying out economic activities
• Both consumers and firms enjoy the freedom of choice; consumers have the freedom to consume what they want to and firms have the choice to produce what they want to
• The factor owners enjoy the freedom of occupational choice, i.e., they are free to use their resources in any legal business or occupation;
• There exists a high degree of competition in both commodity and factor markets and
• There is least interference by the government in the economic activities of the people; the government is in fact supposed to limit its traditional functions viz, to defence, police, justice, some financial organizations and public utility services.


Government Controlled Economy
The government-controlled economies are also called as Command, Centrally planned or Socialist economies. Such economies are, in contradistinction to the free enterprise economies, controlled, regulated and managed by the government agencies.
The other features of a pure socialist economy are:
• Means of production are owned by the society or by the state in the name of the community – private ownership of factors and property is abolished;
• Social welfare is the guiding factor for economic activities – private gains, motivations and initiatives are absent,
• Freedom of choice for the consumers is curbed to what society can afford for all, and
• The role of market forces and competition is eliminated by law.