The Basic Picture of Market Economy Operation Under the Complement of Freedom and Regulation

Abstract

Market economy is the foundation of the modern global economic system. Its operation principle is based on the independent decision-making of individuals and enterprises, and it spontaneously adjusts the balance between supply and demand through the market mechanism. The "invisible hand" is an economic concept put forward by Adam Smith in his book The Wealth of Nations. That is, in the market economy, individuals seem to be guided by an "invisible hand" in the process of pursuing personal interests, which makes their behavior ultimately promote the improvement of the overall welfare of the society. In the market economy, this "invisible hand" coordinates the relationship between supply and demand through the price mechanism, guides the effective allocation of resources, and makes the individual's pursuit of interests to increase the social wealth unconsciously.The "invisible hand" is one of the core principles of the operation of the market economy, explaining how the market can effectively allocate resources and promote the growth of economic welfare without a central plan. However, the market economy is not without defects, so proper regulation is needed to ensure its healthy and stable operation. Government regulation plays an important role in the economic operation through the implementation of proactive fiscal policy and prudent monetary policy, as well as flexible and moderate industrial policies. Therefore, it is necessary to coordinate the relationship between the two and give full play to the role of the government and the "two hands". The role of the government and the market is not opposite, but complement each other. They should be coordinated, complement each other's advantages and make concerted efforts.