Economic system
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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. Currently capitalist system is the world's most dominant form of economic system.
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[edit] 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 of Economic systems
The basic and general economic systems are:
- Market economy (the basis for several "hands off" systems, such as capitalism).
- Mixed economy (a compromise economic system that incorporates some aspects of the market approach as well as some aspects of the planned approach).
- Planned economy (the basis for several "hands on" systems, such as socialism, or a command economy).
- Traditional economy (a generic term for the oldest and traditional economic systems)
- Participatory economics (a recent proposal for a new economic system)
- Inclusive Democracy (a project for a new political and economic system)
- Gift economy where an exchange is made without any explicit agreement for immediate or future rewards
- Barter economy where goods and services are directly exchanged for other goods or services
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.
[edit] Division of economic systems
Typically, "hands-on" economic systems involve a greater role for society and/or the state to pick goods and services, 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.
[edit] "Hands on" systems
[edit] "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.
[edit] "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.
[edit] "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.
- Communism
- Anarchist communism (a form of libertarian socialism)
- Socialism
- Libertarian socialism
- Democratic Socialism (a form of socialism in which enterprises are managed democratically by workers but are owned by the state)
- Participatory economics
[edit] "Hands off" systems
[edit] "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.
[edit] "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 economy is more market-oriented but contains a number of state-owned enterprises that operate in the market and are subject to market forces.
[edit] "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.
- Anarchist economics
- Syndicalism
- Anarcho-syndicalism
- Participatory planning
- Inclusive democracy (a project for a new political and economic system based on democratic principles and libertarian socialism)
- Pure communism
- Mutualism (Social anarchist varient)
- Non-property system
[edit] "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.
- Distributism
- Georgism
- Mixed economy
- American School
- Dirigisme
- Nordic model
- Japanese system
- Mercantilism
- Social market economy also known as Soziale Marktwirtschaft
- Social corporatism
- Socialist-oriented market economy
- PROUT also known as Progressive Utilization Theory
- Indicative Planning also known as a planned market economy
[edit] Other Economic Systems
- Voluntary work/charity - workers choose their own jobs, for no tangible renumeration.
- Open Source - utilizing the fact that information can be copied essentially for free, people team together to collectively produce information-based products for their own (and other's) 'free' consumption. Sometimes hybridized with gifting; or with capitalism via revenue from subscriptions, advertisements, etc; or with elements of volunteering/charity.
- Slavery/community service - workers are forced to work for little or no renumeration by a free ruling class; sometimes used temporarily as a punishment
[edit] 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.
- American School
- Anarchism
- Anarcho-capitalism
- Anarcho-communism
- Autarky
- Barter economy
- Buddhist Economy
- Capitalism
- Colonialism
- Communism
- Coordinatorism
- Corporatism
- Corporate capitalism
- Digital Economy
- Distributism
- Dirigisme
- Fascist socialization
- Feudalism
- Green economy
- Hydraulic despotism
- Inclusive Democracy
- Information economy
- Internet Economy
- Islamic economics
- Japanese System
- Knowledge economy
- Libertarian communism
- Libertarian socialism
- Market economy
- Market socialism
- Marxian economics
- Mercantilism
- Mixed economy
- Mutualism
- National Socialism
- Natural economy
- National Economy Model Haydarizm
- Neo-colonialism
- Network Economy
- Nordic model
- Non-property system
- Parecon
- Participatory economy
- Planned economy
- Progressive Utilization Theory
- Resource-based economy
- Self-management
- Social market economy
- Socialism
- Socialist market economy
- Syndicalism
- Subsistence economy
- Traditional economy
- Virtual economy
[edit] See also
[edit] References
- ^ NA (2007). "economic systems," The New Encyclopædia Britannica, v. 4, p. 357.
- ^ NA (2007). "economic systems," The New Encyclopædia Britannica, v. 4, pp. 357-58.
- ^ David W. Conklin (1991), Comparative Economic Systems,University of Calgary. Press, p.1.
- ^ 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."
- ^ 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."
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[edit] 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'
[edit] External links
- Video Overview of Economic Systems by Thinkwell
- Social Studies VSC Glossary
- Glossary-Cultural Anthropology
- ECONOMIC SYSTEMS, a refereed journal for the analysis of market and non-market solution, by Elsevier since 2001.
- Economic Systems by WebEc, 2007.
- World Economic Systems
