An
economic system is the system of
production,
distribution and
consumption of
goods and
services of an
economy. Alternatively, it is the set of principles and techniques by which problems of
economics are addressed, such as the
economic problem of scarcity through allocation of finite productive resources. The economic system is composed of
people and
institutions, including their relationships to productive resources, such as through the
convention of
property. Examples of contemporary economic systems include
capitalist systems,
socialist systems, and
mixed economies. "Economic systems" is the
economics category that includes the study of respective systems.
There are mainly four(4) types of economic system.
1. Market economy/ Capitalism (Business controlled privately EX:America, India)
2. Planned economy/ communism or socialism (Business controlled by the government EX:China, USSR)
3. Islamic economy ( Everything controlled by the laws of Islam EX:Iran)
4. Mixed Economy ( Capitalism + Socialism EX:Bangladesh, Pakistan)
Overview
An economic system can be defined as a "set of methods and standards brought by which a society decides and organizes the
allocation of limited
economic resources to satisfy unlimited human wants. At one extreme, production is carried in a
private-enterprise system such that all resources are privately owned. It was described by
Adam Smith as frequently promoting a social interest, although only a private interest was intended. At the other extreme, following
Karl Marx and
Vladimir Lenin is what is commonly called, such that all resources are publicly owned with intent of minimizing inequalities of wealth among other social objectives".
Alternatively, 'economic system' refers to the organizational arrangements and process through which a
society makes its
production and
consumption decisions. In creating and modifying its economic system, each society chooses among alternative objectives and alternative decision modes. Many objectives may be seen as desirable, like
efficiency,
growth,
liberty, and
equality.
Part of a social system
An economic system can be considered a part of the
social system and hierarchically equal to the
law system,
political system,
cultural, etc. There is often a strong correlation between certain
ideologies,
political systems and certain economic systems (for example, consider the meanings of the term "
communism"). Many economic systems overlap each other in various areas (for example, the term "
mixed economy" can be argued to include elements from various systems). There are also various mutually exclusive hierarchical categorizations.
Basic types Economic systems
The basic and general economic systems are:
- Mixed economy (a compromise economic system that incorporates some aspects of the market approach as well as some aspects of the planned approach).
There are several basic and unfinished questions that must be answered in order to resolve the problems of economics satisfactorily. The scarcity problem, for example, requires answers to basic questions, such as:
what to produce,
how to produce it, and
who gets what is produced. An economic system is a way of answering these basic questions, and different economic systems answer them differently.
Division of economic systems
Typically, "hands-on" economic systems involve a greater role for
society and/or the
government to pick
goods and
services, with the stated aim of ensuring
social justice and a more equitable distribution of
wealth (see
welfare state).
Meanwhile, "hands-off" economic systems give more power to private individuals (and perhaps
corporations) to make those decisions, rather than leaving them up to society as a whole, and often limit government involvement in the economy. Often the primary concern of "hands-on" economic systems are usually
egalitarianism, while the primary concern of "hands-off" economic systems is usually
private property.
Libertarians target individual
economic freedom as a primary goal of their "hands-off" policies, though in general, most types of economic systems claim that their system of economic organization is either most
efficient or socially
effective.
The following list divides the main economic systems into "hands-on" and "hands-off," it attempts to structure the systems in a given section by alphabetical order and in a vertical hierarchy where possible.
"Hands on" systems
"Hands-on" Private-oriented Systems
A system in which large privately-owned entities control or direct the economy in their favor, or in which private shareholders invest in and own enterprises that are operated by the state or by employee cooperatives.
"Hands-on" State-oriented Systems
Economic systems in which the state directs or controls economic activity through economic planning.
"Hands-on" Communal-oriented Systems
Economic systems in which a collective, such as a commune or cooperative directs or plans large-scale economic activity.
- *Democratic Socialism (a form of socialism in which enterprises are managed democratically by workers but are owned by the state)
"Hands off" systems
"Hands-off" Private-oriented Systems
Economic systems in which the economy is controlled privately in a usually decentralized fashion and operated based on market principles.
"Hands-off" State-oriented Systems
Economic systems in which the state runs, owns and/or manages its own resources and enterprises in a free-market economy with minimal regulation and without government planning.
- *Various socialist proposals in which the means of production are owned and operated by the state in a free-market system with no government regulation
- *Mixed Economies That are more market-oriented but contain a number of state-owned enterprises that operate in the market and are subject to market forces.
"Hands-off" Communal-oriented Systems
Economic systems that are characterized by decentralized cooperative or collective ownership that operate in market economies or decentralized, collectively-planned economies.
- *Inclusive Democracy (a project for a new political and economic system based on democratic principles and libertarian socialism)
"Compromise" Mixed systems
Economic systems that contain substantial state, private and sometimes cooperative ownership and operated in mixed economies - i.e, ones that contain substantial amounts of both market activity and economic planning.
- *PROUT also known as Progressive Utilization Theory
List of economic systems
An
etymologist's approach to economic systems, this list attempts to sort all possible economic systems in alphabetical order, without any division or hierarchization.
See also
