Editing Market economy (section)

== Socialism ==
{{main|Market socialism}}
Market socialism is a form of market economy where the means of production are [[Social ownership|socially owned]]. In a market socialist economy, firms operate according to the rules of supply and demand and operate to maximize profit; the principal difference between market socialism and capitalism being that the profits accrue either directly to the workers of the company or society as a whole as opposed to private owners.<ref>''Comparing Economic Systems in the Twenty-First Century'', 2003, by Gregory and Stuart. {{ISBN|0618261818}}. (p. 142): "It is an economic system that combines social ownership of capital with market allocation of capital...The state owns the means of production, and returns accrue to society at large."</ref>

The distinguishing feature between non-market socialism and market socialism is the existence of a market for [[factors of production]] and the criteria of profitability for enterprises. Profits derived from publicly owned enterprises can variously be used to reinvest in further production, to directly finance government and social services, or be distributed to the public at large through a [[social dividend]] or [[basic income]] system.<ref name="Social Dividend versus Basic Income Guarantee in Market Socialism, 2004">''Social Dividend versus Basic Income Guarantee in Market Socialism'', by Marangos, John. 2004. International Journal of Political Economy, vol. 34, no. 3, Fall 2004.</ref>

Advocates of market socialism such as [[Jaroslav Vaněk]] argue that genuinely free markets are not possible under conditions of private ownership of productive property. Instead, he contends that the class differences and inequalities in income and power that result from private ownership enable the interests of the dominant class to skew the market to their favor, either in the form of monopoly and market power, or by utilizing their wealth and resources to legislate government policies that benefit their specific business interests. Additionally, Vaněk states that workers in a socialist economy based on cooperative and self-managed enterprises have stronger incentives to maximize productivity because they would receive a share of the profits (based on the overall performance of their enterprise) in addition to receiving their fixed wage or salary. The stronger incentives to maximize productivity that he conceives as possible in a socialist economy based on cooperative and self-managed enterprises might be accomplished in a free-market economy if [[cooperatives]] were the norm as envisioned by various thinkers including [[Louis O. Kelso]] and [[James S. Albus]].<ref>[http://www.ru.org/index.php/30-economics/357-cooperative-economics-an-interview-with-jaroslav-vanek "Cooperative Economics: An Interview with Jaroslav Vanek"] {{Webarchive|url=https://web.archive.org/web/20210817073532/http://www.ru.org/index.php/30-economics/357-cooperative-economics-an-interview-with-jaroslav-vanek |date=2021-08-17 }}. Interview by Albert Perkins. Retrieved March 17, 2011.</ref>

=== Models of market socialism ===
Market socialism traces its roots to [[classical economics]] and the works of [[Adam Smith]], the [[Ricardian socialists]] and [[Mutualism (economic theory)|mutualist]] philosophers.<ref>{{cite book|last=McNally|first=David|title=Against the Market: Political Economy, Market Socialism and the Marxist Critique|publisher=Verso|year=1993|isbn=978-0860916062|page=44|quote=...by the 1820s, 'Smithian' apologists for industrial capitalism confronted 'Smithian' socialists in a vigorous, and often venomous, debate over political economy.}}</ref>

In the 1930s, the economists [[Oskar Lange]] and [[Abba Lerner]] developed a model of socialism that posited that a public body (dubbed the Central Planning Board) could set prices through a trial-and-error approach until they equaled the [[marginal cost]] of production in order to achieve [[perfect competition]] and [[pareto optimality]]. In this model of socialism, firms would be state-owned and managed by their employees and the profits would be disbursed among the population in a social dividend. This model came to be referred to as market socialism because it involved the use of money, a [[price system]] and simulated capital markets, all of which were absent from traditional non-market socialism.

A more contemporary model of market socialism is that put forth by the American economist [[John Roemer]], referred to as [[economic democracy]]. In this model, [[social ownership]] is achieved through public ownership of equity in a market economy. A Bureau of Public Ownership would own controlling shares in publicly listed firms, so that the profits generated would be used for public finance and the provision of a basic income.

Some [[Free-market anarchism|anarchists]] and [[libertarian socialists]] promote a form of market socialism in which enterprises are owned and managed cooperatively by their workforce so that the profits directly remunerate the employee-owners. These cooperative enterprises would compete with each other in the same way private companies compete with each other in a capitalist market. The first major elaboration of this type of market socialism was made by [[Pierre-Joseph Proudhon]] and was called mutualism.

Self-managed market socialism was promoted in Yugoslavia by economists [[Branko Horvat]] and [[Jaroslav Vaněk]]. In the self-managed model of socialism, firms would be directly owned by their employees and the management board would be elected by employees. These cooperative firms would compete with each other in a market for both capital goods and for selling consumer goods.

=== Socialist market economy ===
Following the [[1978 reforms]], China developed what it calls a [[socialist market economy]] in which most of the economy is under state ownership, with the state enterprises organized as joint-stock companies with various government agencies owning controlling shares through a shareholder system. Prices are set by a largely free-price system and the state-owned enterprises are not subjected to micromanagement by a government planning agency. A similar system called [[socialist-oriented market economy]] has emerged in Vietnam following the {{lang|vi|[[Đổi Mới]]}} reforms in 1986. This system is frequently characterized as [[state capitalism]] instead of market socialism because there is no meaningful degree of employee self-management in firms, because the state enterprises retain their profits instead of distributing them to the workforce or government and because many function as ''de facto'' private enterprises. The profits neither finance a social dividend to benefit the population at large, nor do they accrue to their employees. In China, this economic model is presented as a [[Primary stage of socialism|preliminary stage of socialism]] to explain the dominance of capitalistic management practices and forms of enterprise organization in both the state and non-state sectors.