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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.[1] 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.

Contents

Overview

An economic system can be defined as a "set of methods and standards 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 a pure-communist system, such that all resources are publicly owned with intent of minimizing inequalities of wealth among other social objectives".[2]

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.[3]

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:

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 is 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.

"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.

  • Socialism
    • Socialist market economy
    • 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.

"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.

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

References

  1. ^ NA (2007). "economic systems," The New Encyclopædia Britannica, v. 4, p. 357.
  2. ^ NA (2007). "economic systems," The New Encyclopædia Britannica, v. 4, pp. 357-58.
  3. ^ David W. Conklin (1991), Comparative Economic Systems, Cambridge University Press, p.1.

Further reading

  • Richard Bonney (1995), Economic Systems and State Finance, 680 pp.
  • David W. Conklin (1991), Comparative Economic Systems, Cambridge University Press, 427 pp.
  • George Sylvester Counts (1970), Bolshevism, Fascism, and Capitalism: An Account of the Three Economic Systems.
  • Robert L. Heilbroner and Peter J. Boettke (2007). "Economic Systems". The New Encyclopædia Britannica, v. 17, pp. 908–15.
  • Harold Glenn Moulton, Financial Organization and the Economic System, 515 pp.
  • Jacques Jacobus Polak (2003), An International Economic System, 179 pp.
  • Frederic L. Pryor (1996), Economic Evolution and Structure: 384 pp.
  • Frederic L. Pryor (2005), Economic Systems of Foraging, Agricultural, and Industrial Societies, 332 pp.
  • Graeme Donald Snooks, Global Transition: A General Theory, PalgraveMacmillan, 1999, 395 pp. gfhyj'

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