Question

What are the weak points,or economic costs, that are part of a free enterprise economy

Answer 1

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Answer 2

From this point of view, particular economic systems have been described as "free economy" even when the state intervenes in the economy, provided that this intervention is within certain limits. Thus, the terms capitalism, free market economy and mixed economy are, from this perspective, practically interchangeable terms

Internationally, since the 70s of the 20th century, the promotion - at different levels of enthusiasm and commitment - of a global free trade economy, deregulation, the privatization of public enterprises and the reduction of social spending reappears in the panorama, measures that some they call, sometimes improperly, neoliberalism.

For the general proposal, the function of a government is arguable. Ideally, the use of force or coercive power of the state in the market is limited to protecting market participants from coercion and / or third party abuses, including protection of property rights and contract enforcement. However, exactly what is meant by abuses is open to interpretation. For example, for Adam Smith, negative externalities cause some to transfer to others at least part of the cost of their activities, thus obtaining extra personal benefits, while positive externalities enable the acquisition of benefits without contributing (see problem of the stowaway). According to Smith, this and other similar problems require the existence of an organism (the State) that can solve them, which in turn implies a certain degree of state intervention.