Types Of Economic Systems In The World

Because of the problem of scarcity, every economic system (capitalist, socialist, or otherwise) must function in order to meet societal needs. Given the scarcity of resources, it is believed that decisions must be made about what to produce. How much of each commodity should be manufactured? What is the best way to make it? To whom should I produce?

 

Every society devises a method for addressing its most fundamental economic issues. The economic system is the name given to this entity.

 

In a nutshell, an economic system is the method by which a society makes decisions involving economic variables. In this light, a society's economic system determines how it responds to fundamental economic questions such as what to produce, how to produce it, who will receive it, and how future growth will be facilitated. The fundamental differences between economic systems are the extent to which individual rather than governmental bodies make economic decisions, as well as whether the means of production are privately or publicly owned.

 

 

Economic systems come in a variety of shapes and sizes. Traditional, command/socialist, pure capitalism, and mixed economic systems are examples of these.

 

 

This is a type of economy in which tribal rules or customs frequently govern the organisation of production and distribution. This type predominated in the early stages of development, when the economy was inextricably linked to the community's social structure and people performed economic tasks for reasons other than profit. Economic matters are largely determined by social or religious customs and traditions in the traditional economy. Women may plough fields, for example, because it is their traditional role, not because they are skilled at it. Traditional economic systems are common in developing countries, where they can stifle economic development.

 

 

In a command economy, the music is played by an authoritarian central government. It follows orders from those in positions of power. Decisions about the functions of an economic system are made on a collective or group basis in this type of economy. The factors of production are collectively owned. It's possible that the group that owns the factors of production and makes decisions is a government agency. A command economy is one that is centrally planned. In most cases, there is very little freedom of choice. The central planners who make arrangements for future economic growth determine the occupation of workers, the quantities of which type of commodity to be produced, and the distribution of income. Cuba, North Korea, Russia, and Iran are examples of near-perfect command economies.

 

 

Pure capitalism is an economic system based on private ownership and the freedom of individuals to conduct their economic affairs without government or other groups interfering. Consumers and businesses in the market for commodities and resources have a lot of freedom of choice in capitalist economic systems. The capitalist economy is also known as a market economy or a free exchange economy. Freedom is the essence of pure capitalism. There is freedom to own property, to buy and sell, and to live a life free of government interference in one's economic affairs. Even though it is not a purely capitalist economy, the United States' economy best exemplifies capitalism.

 

 

Many economies can be classified as a mix of capitalist and command economies. Mixed capitalistic systems refer to the United States and other countries that heavily rely on markets to allocate resources and distribute output. Most of its economic activities reflect the characteristics of the free enterprise system. However, some of the mixed economy's economic decisions are made collectively, and some of the productive resources or goods are owned by the government. Both government and private decisions are important in the mixed capitalistic economic system.