The American Free Enterprise System Essay

Economic systems are identified by how they answer the three questions of what, how, and for whom to produce. Similarly, they are theoretical representations of economies found throughout the world that demonstrate the distribution of control between people and the government. The economic systems exist on a continuum, with command economies on one side and the free markets on the other side. The united States has a free market economy but with a notable amount of government intervention, therefore it has a mixed economy.

The government acts as a provider ND regulator of the United States’ mixed economy through setting legal limits and sensible policies for economic functions for the people. In the United States, decisions are made by Individuals acting as participants within the market. The federal, state, and local governments, however, make laws protecting private property and regulating certain areas of business. Practiced In the united States today, capitalism would be best defined as an economic system in which individuals own the factors of production, but decide how to use them within legislated limits.

Nearly identical to capitalism, the free enterprise system is another definition for the American economy. The free enterprise system emphasizes that individuals are free to own and control aspects of production, yet expands on the fact that government places legal restrictions on freedom of enterprise. Zoning regulations, child-labor laws, hazardous waste rules, and other regulations limit free enterprise to protect the anticipated entrepreneur and his or her surroundings. When such rules are established, freedom has is boundaries and is considered a reveille.

Consumers In a market economy have the advantage of being able to choose among products. Contrasting to freedom of enterprise, freedom of choice applies to only the buyers, not the sellers. Although buyers are free to make choices, the market has grown into an increasingly complex place. A consumer’s choice determines the success or failure of a good or service. The profit incentive is the desire to make a profit. This motivates entrepreneurs to establish new businesses, expand existing ones, and change the kinds of goods and services produced.

The government has Intervened In various areas of the economy to protect buyers. From a simple requirement for companies to place warning labels on potentially dangerous products to regulating the prices that a company may charge, the government arbitrates in company dealings to help keep all consumers relatively satisfied and secure in their purchases. One of the most Important characteristics of capitalism and free enterprise Is the governments, but rather held by a person or persons.

The right to all property-land, easiness, automobiles, and whatever else the person can afford-aids in the production of wealth and prosperity for all. According to the Constitution, the government has no power to seize private property unless payment is given to the individual. What are called the rights of property are the rights to risk investment and acquire new ways of producing while learning the benefits and downfalls of ownership. Among the economic goals of Americans are economic freedom, economic security, economic stability, and economic growth.

To obtain these goals, individual opinions long with government decisions must fall into equilibrium. In order to have a well- functioning enterprise system, individuals are required to take on certain economic responsibilities. Such responsibilities include attempting to rise as a successful entrepreneur and obtaining the knowledge of possible government policies while analyzing the consequences of those policies. The United States illustrates the characteristics of a mixed economy by combining freedom of choice, the desire to make profit, and the right to property with government regulations.

A free enterprise economic system is a crucial component of capitalist economic policy. It dictates that the government will not unduly interfere with economic transactions. No capitalist economy in practice is completely free enterprise, and a political debate has occurred for centuries concerning how desirable that would be.

The Facts

Most economic systems operate under a constant possibility of government intervention in economic transactions. The free enterprise model states that transactions should generally not be interfered with by governments. Specifically, ownership of property and the freedom to create the means of production are guaranteed under a free enterprise model.


Economic systems that guarantee the fruits of labor to the people who produce such labor are generally shown to be more productive and create more wealth than economic systems in which the value of labor does not accrue to the person doing the labor, according to "Free Enterprise: The Economics of Cooperation," published by the Federal Reserve Bank of Dallas. Many countries, including those that do not subscribe to a capitalist economy, have adopted free enterprise principles to grow their economies as quickly as possible.


Many varieties of the free enterprise model exist around the world. Singapore and the United States are frequently cited as having among the most free economies, with less interference by government than their economic peers. However, both retain the right to regulate businesses across various domains. The European free enterprise model, in comparison, has much stricter regulation, and accrues to the government a greater right to interfere in private transactions. Both of these models can be called free enterprise and capitalist, but they operate very differently in pragmatic terms.


The free enterprise system gains its strength from principles that were laid out in Adam Smith's "Wealth of Nations" over 200 years ago. His theories have been borne out by experience, and economies that run on government fiat rather than Smith's "invisible hand of the markets" theory tend to grow at a much slower pace than free-market models, states "Free Enterprise." However, a lack of regulation in the name of free enterprise can arguably lead to negative effects, as has been debated after the 2010 oil spill in the Gulf of Mexico.


Libertarian political philosophy states that the only true free enterprise economy is one that is entirely unfettered by regulations. However, there has never been a large-scale implementation of this idea. In common use of the term "free enterprise," both the United States and Europe enjoy a free enterprise system, even though regulations are imposed upon them.

About the Author

Ellis Davidson has been a self-employed Internet and technology consultant, entrepreneur and author since 1993. He has written a book about self-employment for recent college graduates and is a regular contributor to "Macworld" and the TidBITS technology newsletter. He is completing a book on self-employment options during a recession. Davidson holds a Bachelor of Arts in American civilization from the University of Pennsylvania.

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