Economic system

Economic system

An economic system is a system that involves the production, distribution and consumption of goods and services between the entities in a particular society. The economic system is composed of people and institutions, including their relationships to productive resources, such as through the convention of property. In a given economy, it is the systemic means by which problems of economics are addressed, such as the economic problem of scarcity through allocation of finite productive resources. Examples of contemporary economic systems include capitalist systems, socialist systems, and mixed economies. Economic systems is the that includes the study of respective systems.


An economic system is a set of methods and standards brought by which a society decides and organizes the ownership and allocation of economic resources. 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 an intent of minimizing inequalities of wealth among other social objectives. [NA (2007). "economic systems," "The New Encyclopædia Britannica", v. 4, pp. 357-58.]

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. [ David W. Conklin (1991), "Comparative Economic Systems", Cambridge UniversityPress, p.1.]

;Part of a social systemAn economic system can be considered a part of the social system and hierarchically equal to the law system, political system, cultural system, etc. There is often a strong correlation between a 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 systemsThe 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).
*Command Economy (a complete "hands on" system, such as the Soviet economic model).
*Traditional economy (a generic term for the oldest and traditional economic systems)
*Participatory economics (a recent proposal for a new economic system)

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 determine what gets produced, how it gets produced, and who gets the produced 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.

Oftentimes 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" State-oriented Systems

Economic systems in which the state directs or controls economic activity.
*Marxian Socialism
**State socialism
**Market socialism

"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.
*State Corporatism
**State Capitalism
**Fascist Economics

"Hands-on" Communal-oriented Systems

Economic systems in which a collective, such as a commune or cooperative directs or plans large-scale economic activity.
**Anarcho-communism (a form of libertarian 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

"Hands-off" Private-oriented Systems

Economic systems in which the economy is controlled by privately in a usually decentralized fashion and operated based on market principles.
**Laissez-faire capitalism
**Corporate capitalism
*Gift economy
*Mutualism (a form of libertarian socialism)

"Hands-off" State-oriented Systems

Economic systems in which the state runs, owns and/or manages its own resources and businesses in a free-market economy with minimal regulation.
*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
*Various forms of Mixed economies

"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
**Participatory Planning
*Mutualism (a form of libertarian socialism)
*Non-property system

"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.
*Mixed economy
**American School
**Nordic model
**Japanese System
**Social market economy also known as "Soziale Marktwirtschaft"
**PROUT also known as Progressive Utilization Theory
**Indicative Planning also known as a planned market economy

List of economic systems by Name

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
*Barter economy
*Buddhist Economy
*Command economy
*Corporate capitalism
*Digital Economy

*Fascist socialization
*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
*Mixed economy

*Natural economy
*Network Economy
*Nordic model
*Participatory economy
*Planned economy
*Progressive Utilization Theory
*Resource based economy
*Social market economy
*Socialist market economy
*Subsistence economy
*Traditional economy
*Virtual economy

See also

*History of economic thought
*Political economy
*Economic ideology


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.

External links

* [ 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]

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