1. When most people think of finance, ideas such as stock exchanges, banks, and corporations often
come to mind. Yet as a social science, business is linked to the decisions and behaviors of its
players. The Principle of Self-Interest suggests that all things being equal, people act in their own
financial self-interest. For some, the Principle of Self-Interest may seem cold and unfeeling
because there are other aspects to life other than attaining money. The principle does not
presuppose that money is the most important aspect in anyone’s life. Financial transactions often
take place without parties meeting face-to-face. Buying and selling stocks, for example, are
transacted by a telephone call to a broker or a click of a mouse online. Often, the two parties are
unaware of the people with whom they are doing business. Therefore, they buy and sell
securities based on what is good for them even if it means a loss of value for the other party.

2. Generally, the Principle of Self-Interested Behavior explains human behavior well and captures
much of its variability in competitive financial markets.
Advantages of Self Interest:
It is seldom disputed that people have a natural tendency to act out of self interest, although the
extent and definition of self interest have not found consensus. Debate ensues on the topic of
whether this tendency is a paragon of morality, a vice to be conquered with altruism, or
somewhere in the continuum between the two extremes. In Atlas Shrugged, Ayn Rand professes
a view of morality where the only moral actions are those that follow the rational inclinations of
man. The view of Joseph Butler, espoused in his sermon Upon the Love of Our Neighbor, is that
man should harbor a benevolence and love for his fellow neighbor and engage in those actions
that best serve both himself and his neighbor. In reality, these views are equivalent in their
results and applications. Despite different views of motivation, the theories ultimately prescribe
similar actions. The precept of strategic self-interest advocated by Rand is moral not merely
because it embraces rationality, but also, it will be demonstrated, because it fosters a flourishing
in one's neighbor. To act rationally and with strategic self-interest is to think locally and act
globally. In adopting a set of rules that benefits only the individual, reality dictates concessions
and compromises that dispute Rand's fundamental disposition to helping others but stem from
her idea of self interest and collaterally benefit everyone.Ayn Rand summarized her philosophy
as "the concept of man as a heroic being, with his own happiness as the moral purpose of his life,
with productive achievement as his noblest activity, and reason as his only absolute." While
Rand does not spell out a definition of self interest, this approximates it. Rand felt that self
interest is the long-term promotion of one's own intellectual and productive capabilities and
happiness. Rand critiqued conventional altruistic moral codes as being immoral because they
dismissed pleasure and rational self interest. She felt that the "mind is only judge of truth" and
that "the extent to which a man is rational, life is the premise directing his actions. To the extent
to which he is irrational, the premise directing his actions is death.
Disadvantages of Self Interest:

3. Marked Economy vs. Command Economy:-
MarketEconomy:
In a market economy, national and state governments play a minor role. Instead, consumers and
their buying decisions drive the economy. In this type of economic system, the assumptions of
the market play a major role in deciding the right path for a country’s economic development.
Market economies aim to reduce or eliminate entirely subsidies for a particular industry, the pre-
determination of prices for different commodities, and the amount of regulation controlling
different industrial sectors.
Command Economy:

4. A planned economy is also sometimes called a command economy. The most important aspect
of this type of economy is that all major decisions related to the production, distribution,
commodity and service prices, are all made by the government. The planned economy is
government directed, and market forces have very little say in such an economy. This type of
economy lacks the kind of flexibility that is present a market economy, and because of this, the
planned economy reacts slower to changes in consumer needs and fluctuating patterns of supply
and demand. There are two polar opposite approaches to an economy's operation. The command
economy is the top-down, centrally-planned economy of socialism. The market economy is the
decentralized economy of the free market. The most fundamental distinction between the two is the
existence of private property in the free market and the absence of private property in the command
economy. The alleged virtue of the command economy is that it is planned in contrast to the
unplanned market economy. The error in this view is that the market economy is actually very
rationally planned by means of consumer demand through the price system. Additionally, for four
reasons the command economy will be deficient. First, an attempt to plan an entire economy by a
central committee is bound to be inefficient just because the task is so large. There is no way that a
committee of say, 300 planners can know the needs, conditions of resource availability, and
localized knowledge spread throughout an economy. Second, the command economy ultimately
rests on coercion as its means of motivation. Socialists will typically claim that the resort to
coercion (the Berlin Wall, Russian gulags, etc.) is not part of their system, but only an unfortunate
bad choice in political leaders and those socialism only attempts to control the economy, not
people's individual liberties. But, of course the main element in an economic system is in fact
people; therefore controlling an economy is first and foremost control of people--the Berlin Wall
was no peculiar misfortune. Suffice it to say further that human motivation is diminished when
coerced. Third, the command economy is a collectivized system. All work for the benefit of their
quotal share of total production. Individual incentives are absent. As an example, with 100 workers
in an economy each will receive 1/100 of total production. If one worker shirks, his loss is only
1/100 of the production he otherwise would have generated. (Imagine the incentives when this
system is broadened to a nation of 200 million!) Each ends up attempting to live at the expense of
others and total production plummets. And fourth, the incentive of production is to please the
political authorities who have life and death control over the workers. In contrast to the market,

5. where production is predicated on consumer demand, the consumer is the forgotten being in a
command economy.
Self Interest
Self-interest simply means doing what is in the best interests of one’s self. As such, such
behavior is instinctive and inherent in the universe, both as to humans and other life forms. From
a business and economic standpoint, it is only when each of us acts in our own self-interests that
the collective “society” can elevate. Paternalism in business is of little or no value in achieving
that goal and does not help the party being patronized. (Read “Capitalism”). It’s the old “give a
man a fish and he eats for one day but teach a man to fish and he eats forever” story. By acting
in one’s self-interest and thus teaching the other party in a transaction to do so as well, the actor
is helping that other party achieve independence from dependence. To cater to the other party’s
dependence on that paternalism only makes you co-dependent. That neither helps you nor the
other party. There is absolutely nothing wrong and there is absolutely everything right in
advancing one’s self-interest. It is a sign of self-respect. Starting out with the “own everything”
mantra is a mindset that then enables you to negotiate from that standpoint. (Read “Private
Laws”) Clearly since rights are often a zero sum game, by seeking to own everything, you then
are in a position to negotiate for participation in everything even if the other party actually owns
it. But if you start out being willing to not own everything, to give it away in the name of “fair”
or otherwise, you are already starting out below ground level.
Contract provisions are there, in the open, for all parties to read. If a party does not know what
the provisions mean or their full potential implication, they should seek the advice of someone
who does. If you sign an agreement without knowing what you need to know, you have only
yourself to blame.

6. Resolved Question
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What is the difference between market and command economy?
 3 years ago
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M.A.W.
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An economy may be defined as the state of a country or region in terms of the production and
consumption of goods and services, and the supply of money.
A market economy (also called a free market economy, free enterprise economy) is an economic system
in which the production and distribution of goods and services takes place through the mechanism of free
markets guided by a free price system .
On the other hand, a command economy (also known as planned economy) is an economic system in
which the state or government controls the factors of production and makes all decisions about their use
and about the distribution of income . There is another type of economy, known as Mixed economy.
Mixed Economy is combination of free market and command economy. However, this essay will analyze
the main key difference between command and free market.
A command system is one in which decision making is centralized. In a command economy, the
government controls the factors of production and makes all decisions about their use and about the
consumption of output. The central planning unit takes the inputs of the economy and directs them into
outputs in a socially desirable manner. This requires a careful balancing between output goals and
available resources. Resources is allocated through a planning process. At its most extreme, this means
that the state will direct labor into jobs as well as directing consumers what to consume, although it is
more likely that they will direct producers what to produce, thus determining the choice of goods available
to consumers. What is more, price is controlled by government, they decide minimum and maximum price
of goods according to their importance. For instance, one the one hand, government sets the minimum
price for wheat to encourage farmers to produce more. On the other hand, government sets the maximum
price on rents so every one can easily afford that. In a command economy, the state plans the allocation
of resources between current consumption and investment for future, the output of each industry and firm,
methods of production and the resources allocated to each industry and firm. Moreover, in a command
economy, all factors of production apart from labor are owned by the state. The classic examples of
command economies were the USSR under Stalin and the People's Republic of China during Mao's
Great Leap Forward.
In contrast, in a free market economy, all economic decisions are taken by individuals and firms, which
are assumed to act in their own self-interest. Firms decide what goods shall we produce? They can
produce what ever they want to acquire their maximum profit. They can produce necessity goods such as
foods, clothes, tables and chairs. Moreover, they decide the prices of goods as guided by the laws of
demand and supply. For instance, one firm produces Flat TVs, if Flat TVs are highly demanded, Prices
increase dramatically. However, demand of black and white TVs decrease, consequently prices
decrease. In addition, in a free market economy, the output is determined by the quantity demand, the
techniques of production by the firms themselves keeping in mind efficiency and productivity and land is
free to buy for everyone (firms, business invertors and etc). The free market idea of land ownership can

7. have some good and some disastrous effects. On the one hand, land ownership is good because this
gives the opportunity to business person to plan for long term with out having any problems such as, rent
or charges on the land will increase after few years. On the other hand, land prices will increase
dramatically which will affect the whole country. For instance, residential land values in Japan grew seven
times faster than wages between 1950 and 1988 . This wrecked Japan's economy and it has taken 16
years to recover. The common examples of free market are USA, China and Canada.
To sum up, world has scarce resources. The economic systems of countries are designed to allocate
those resources, through a production system, to provide output for their citizens. The fundamental
questions that these systems answer are: what to produce, how and for whom? Market economies leave
the answers to these questions to the determination of the forces of supply and demand while command
economies use a central planning agency to direct the activities of the economy. Both have their own
strengths and weaknesses. But in really world, all economies are actually mixed economies, incorporating
some facts of both market and command economies. The relative importance of the particular economic
system in the country is the determinant of the type of economic system that it is generally considered to
be.