An economic system is the system of production In microeconomics, industrial organization is the field which describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions. Topics in this field range from classical issues such as opportunity cost to neoclassical concepts such as factors of production, distribution Distribution in economics refers to the way total output or income is distributed among individuals or among the factors of production (Samuelson and Nordhaus, 2001, p. 762). In general theory and the national income and product accounts, each unit of output corresponds to a unit of income. One use of national accounts is for classifying factor and consumption Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined by opposition to production. But the precise definition can vary because different schools of economists define production quite differently. According to some economists, only the final purchase of goods and of goods In macroeconomics and accounting, a good is contrasted with a service. In this sense, a good is defined as a physical product, capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer, say an apple, as opposed to an (intangible) service, say a haircut. A more general term that preserves the and services A service is the intangible equivalent of a good. Service provision is often an economic activity where the buyer does not generally, except by exclusive contract, obtain exclusive ownership of the thing purchased. The benefits of such a service, if priced, are held to be self-evident in the buyers willingness to pay for it. Public services are of an economy An economy consists of the economic system of a country or other area, the labor, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services of that area. A given economy is the end result of a process that involves its technological evolution,. Alternatively, it is the set of principles and techniques by which problems of economics Economics is the social science that is concerned with the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)". Current are addressed, such as the economic problem The economic problem, sometimes called the fundamental economic problem, is one of the fundamental economic theories in the operation of any economy. It asserts that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants. The problem then becomes how to determine what is to be produced and how the of scarcity through allocation of finite productive resources.[1] The economic system is composed of people A person is any individual human being. The term people is the plural of "person" (along with the slightly rarer word "persons"); however, "people" may also be used as a singular to refer to an entire nation or ethnic group and institutions Institutions are structures and mechanisms of social order and cooperation governing the behavior of a set of individuals within a given human collectivity. Institutions are identified with a social purpose and permanence, transcending individual human lives and intentions, and with the making and enforcing of rules governing cooperative human, including their relationships to productive resources, such as through the convention A convention is a set of agreed, stipulated or generally accepted standards, norms, social norms or criteria, often taking the form of a custom of property Property is any physical or intangible entity that is owned by a person or jointly by a group of persons. Depending on the nature of the property, an owner of property has the right to consume, sell, rent, mortgage, transfer, exchange or destroy their property, and/or to exclude others from doing these things. Important widely recognized types of. Examples of contemporary economic systems include capitalist systems Capitalism is an economic system in which the means of production are privately owned; supply, demand, price, distribution, and investments are determined mainly by private decisions in the free market, rather than by the state through central economic planning or through democratic planning; profit is distributed to owners who invest in, socialist systems The word "socialism" refers to a broad range of theoretical and historical socio-economic systems, and has also been used by many political movements throughout history to describe themselves and their goals, generating numerous types of socialism. Different self-described socialists have used the term socialism to refer to different, and mixed economies A mixed economy is an economic system that includes a variety of private and government control, or a mixture of capitalism and socialism. "Economic systems" is the economics category Articles in economics journals are usually classified according to the JEL classification codes, a system originated by the Journal of Economic Literature . The JEL is published quarterly by the American Economic Association (AEA) and contains survey articles and information on recently published books and dissertations. The AEA maintains EconLit, 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 In economics, factors of production are the resources employed to produce goods and services. They facilitate production but do not become part of the product (as with raw materials) or become significantly transformed by the production process (as with fuel used to power machinery). To 19th century economists, the factors of production were land ( 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 Adam Smith was a Scottish moral philosopher and a pioneer of political economics. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations. The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and as frequently promoting a social interest, although only a private interest was intended. At the other extreme, following Karl Marx Karl Heinrich Marx was a German philosopher, self-taught political economist, historian, political theorist, sociologist, communist, and revolutionary, whose ideas played a significant role in the development of modern communism and socialism. Marx summarized his approach in the first line of chapter one of The Communist Manifesto, published in 184 and Vladimir Lenin Vladimir Ilyich Lenin (22 April [O.S. 10 April] 1870 – 21 January 1924), born Vladimir Ilyich Ulyanov (Russian: Владимир Ильич Ульянов, IPA [vlɐˈdʲimʲɪr ɪlʲˈjiʨ ʊlʲˈjanəf]), was a Russian revolutionary and communist politician who led the October Revolution of 1917. As leader of the Bolsheviks, he headed the is what is commonly called a pure-communist Communism is a social structure that aims for egalitarianism through the abolition of the class system and common ownership of property by the community or by the state. It is also the term for the left wing political philosophy and social movement that advocates and aims to create such a society 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 A Society or a human society is a group of people related to each other through persistent relations such as social status, roles and social networks. Human societies are characterized by patterns of relationships between individuals sharing a distinctive culture and institutions. Without an article, the term refers either to the entirety of makes its production In microeconomics, industrial organization is the field which describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions. Topics in this field range from classical issues such as opportunity cost to neoclassical concepts such as factors of production and consumption Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined by opposition to production. But the precise definition can vary because different schools of economists define production quite differently. According to some economists, only the final purchase of goods and decisions Decision making can be regarded as the mental processes resulting in the selection of a course of action among several alternatives. Every decision making process produces a final choice. The output can be an action or an opinion of choice. 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 Economic efficiency is used to refer to a number of related concepts. It is the using of resources in such a way as to maximize the production of goods and services. One economic system is more efficient than another if it can provide more goods and services for society without using more resources. In absolute terms, a system can be called, growth Economic growth is a term used to indicate the increase of per capita gross domestic product or other measure of aggregate income. It is often measured as the rate of change in GDP. Economic growth refers only to the quantity of goods and services produced, liberty Liberty is the concept of ideological and political philosophy that identifies the condition to which an individual has the right to behave according to one's own personal responsibility and free will, and equality Equality of outcome, equality of condition, or Equality of results is a form of social justice rhetoric which seeks to reduce or eliminate incidental inequalities in material condition between individuals or households in a society. This usually means equalizing income and/or total wealth to a certain degree by, for example, granting a greater.[3]

Part of a social system

An economic system can be considered a part of the social system Social structure is a term used in the social sciences to refer to patterned social arrangements which form the society as a whole, and which determine, to some varying degree, the actions of the individuals socialised into that structure. Whereas 'structure' refers to "the macro", "agency" refers to "the micro" and hierarchically equal to the law system Law is a system of rules, usually enforced through a set of institutions. It shapes politics, economics and society in numerous ways and serves as the foremost social mediator in relations between people. Writing in 350 BC, the Greek philosopher Aristotle declared, "The rule of law is better than the rule of any individual.", political system A political system is a system of politics and government. It is usually compared to the legal system, economic system, cultural system, and other social systems. It is different from them, and can be generally defined on a spectrum from left, e.g. communism, to the right, e.g. fascism. However, this is a very simplified view of a much more, cultural Culture is a term that has different meanings. For example, in 1952, Alfred Kroeber and Clyde Kluckhohn compiled a list of 164 definitions of "culture" in Culture: A Critical Review of Concepts and Definitions. However, the word "culture" is most commonly used in three basic senses:, etc. There is often a strong correlation between certain ideologies An ideology is a set of ideas that discusses one's goals, expectations, and actions. An ideology can be thought of as a comprehensive vision, as a way of looking at things , as in common sense (see Ideology in everyday society below) and several philosophical tendencies (see Political ideologies), or a set of ideas proposed by the dominant class, political systems A political system is a system of politics and government. It is usually compared to the legal system, economic system, cultural system, and other social systems. It is different from them, and can be generally defined on a spectrum from left, e.g. communism, to the right, e.g. fascism. However, this is a very simplified view of a much more and certain economic systems (for example, consider the meanings of the term "communism Communism is a social structure in which classes are abolished and property is commonly controlled, as well as a political philosophy and social movement that advocates and aims to create such a society"). Many economic systems overlap each other in various areas (for example, the term "mixed economy A mixed economy is an economic system that includes a variety of private and government control, or a mixture of capitalism and socialism" 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 A Society or a human society is a group of people related to each other through persistent relations such as social status, roles and social networks. Human societies are characterized by patterns of relationships between individuals sharing a distinctive culture and institutions. Without an article, the term refers either to the entirety of and/or the state A sovereign state is a political association with effective internal and external sovereignty over a geographic area and population which is not dependent on, or subject to any other power or state. While in abstract terms a sovereign state can exist without being recognised by other sovereign states, unrecognised states will often find it hard to to pick goods In macroeconomics and accounting, a good is contrasted with a service. In this sense, a good is defined as a physical product, capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer, say an apple, as opposed to an (intangible) service, say a haircut. A more general term that preserves the and services A service is the intangible equivalent of a good. Service provision is often an economic activity where the buyer does not generally, except by exclusive contract, obtain exclusive ownership of the thing purchased. The benefits of such a service, if priced, are held to be self-evident in the buyers willingness to pay for it. Public services are, with the stated aim of ensuring social justice and a more equitable distribution of wealth (see welfare state) or ameliorating market failures (see economic intervention). Meanwhile, "hands-off" economic systems give more power to private businesses (and perhaps corporations) to make those decisions, rather than leaving them up to society as a whole, and often limit government involvement in the market economy.

Often the primary concern of many "hands-on" economic systems that contain government involvement in market-oriented economies is usually egalitarianism, while the primary concern for traditional "hands-on" socialist economic systems was to rationalize production, better coordinate economic activity (and thus provide a superior form of economic organization and exchange to capitalism) and advance the productive forces of the economy from the perspective that the market mechanism of exchange was prone to systemic crises and inefficiencies[4][5]; 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 own, and thus reap the profits, of 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, with economic institutions being primarily publicly-owned.

"Hands-on" Communal-oriented Systems

Economic systems in which a collective, such as a commune or worker cooperative, directs or plans large-scale economic activity, usually combined with workplace democratic management.

"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.

"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

This section is in a list format that may be better presented using prose. You can help by converting this section to prose, if appropriate. Editing help is available. (May 2009)

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,University of Calgary. Press, p.1.
  4. ^ Socialism: Still Impossible After All These Years, on Mises.org. Retrieved February 15, 2010, from Mises.org http://mises.org/journals/scholar/Boettke.pdf, What Socialism means: " The ultimate end of socialism was the 'end of history', in which perfect social harmony would permanently be established. Social harmony was to be achieved by the abolition of exploitation, the transcendence of alienation, and above all, the transformation of society from the 'kingdom of necessity' to the 'kingdom of freedom.' How would such a world be achieved? The socialists informed us that by rationalizing production and thus advancing material production beyond the bounds reachable under capitalism, socialism would usher mankind into a post-scarcity world."
  5. ^ Socialism and Calculation, on worldsocialism.org. Retrieved February 15, 2010, from worldsocialism.org: http://www.worldsocialism.org/spgb/overview/calculation.pdf: "Although money, and so monetary calculation, will disappear in socialism this does not mean that there will no longer be any need to make choices, evaluations and calculations...Wealth will be produced and distributed in its natural form of useful things, of objects that can serve to satisfy some human need or other. Not being produced for sale on a market, items of wealth will not acquire an exchange-value in addition to their use-value. In socialism their value, in the normal non-economic sense of the word, will not be their selling price nor the time needed to produce them but their usefulness. It is for this that they will be appreciated, evaluated, wanted. . . and produced."
This article includes a list of references or external links, but its sources remain unclear because it has insufficient inline citations. Please help to improve this article by introducing more precise citations where appropriate. (September 2008)

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what economic system is best to preserve a traditional model of society?
Q. i mean a society where there is pretty much a lower, middle and upper class...i know that some economic systems want to erase all classes and some want to eliminate the middle...but what economic policies will preserve what we recognize as a normal, economically diverse society?
Asked by Scotty R - Wed Mar 14 16:59:30 2007 - - 3 Answers - 0 Comments

A. The only societies with a sizable middle class were in the last hundred years in developed countries with more or less free markets. The existence of a sizable middle class is a rarity in human history, and even in the world today. I would not describe them as "traditional".
Answered by meg - Thu Mar 15 07:32:42 2007

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