A market economy depends upon the interplay of supply and demand to determine how capital is invested, what is produced, and how goods are priced. Although theoretically there should be little or no government interference in the operation of such markets (hence the term “free markets”), most economies in the world regulate their markets to some extent through different policies and regulations. Whether due to the manipulation of powerful economic forces or defective government intervention, market failures are produced which result in detrimental economic disparities, social problems, and environmental degradation.
Through its policies of economic democracy, PROUT avoids market failures by decentralizing the economy and empowering localities and regions with the task of economic development. This approach neither overburdens the economy with price controls and centralized planning nor does it allow non-local economic players, such as large corporations, to skew the markets for their own profit. Rather, localities are able to meet local needs by using market mechanisms to fulfill local consumption. Through localized economic planning, the current and future demands of a community can be met by ensuring the necessary supply of goods and services while, at the same time, addressing social and environmental conditions.