This article will be permanently flagged as inappropriate and made unaccessible to everyone. Are you certain this article is inappropriate? Excessive Violence Sexual Content Political / Social
Email Address:
Article Id: WHEBN0000692262 Reproduction Date:
An economic system is a system of production and exchange of goods and services as well as allocation of resources in a society. It includes the combination of the various institutions, agencies, entities (or even sectors as described by some authors) and consumers that comprise the economic structure of a given community. A related concept is the mode of production.
The study of economic systems includes how these various agencies and institutions are linked to one another, how information flows between them, and the social relations within the system (including property rights and the structure of management).
Among existing economic systems, distinctive methods of analysis have developed, such as mixed economies.[1]
Economic systems is the category in the Journal of Economic Literature classification codes that includes the study of such systems. One field that cuts across them is comparative economic systems. Subcategories of different systems there include:
There are multiple components to economic systems. Decision-making structures of an economy determine the use of economic inputs (the factors of production), distribution of output, the level of centralization in decision-making, and who makes these decisions. Decisions might be carried out by industrial councils, by a government agency, or by private owners.
In one view, every economic system represents an attempt to solve three fundamental and interdependent problems:
Thus every economy is a system that allocates resources for exchange, production, distribution and consumption. The system is stabilized through a combination of threat and trust, which are the outcome of institutional arrangements.[4] An economic system possesses the following institutions:
There are several basic questions that must be answered in order for an economy to run 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. Many different objectives may be seen as desirable for an economy, like efficiency, growth, liberty, and equality.[7]
Economic systems are commonly segmented by their ownership structure and property rights and by their dominant mechanism of resource allocation. Economies that combine private ownership with market allocation are called "market capitalism", and economies that mix private ownership with economic planning are called "command capitalism". Likewise, systems that mix public or cooperative ownership of the means of production with economic planning are called "planned socialism", and systems that combine public or cooperative ownership with markets are designated as "market socialism".[8] Some perspectives build upon this basis and consider other variables, such as class processes within an economy. This leads some economists to categorize, for example, the Soviet Union's economy as state capitalism based on the analysis that the working class was exploited by the party leadership.[9]
In a capitalist economic system production is carried out for private profit, decisions regarding investment and the use of the means of production are determined by business owners in the marketplace. The means of production are owned primarily by private enterprises and decisions regarding production and investment determined by private owners in capital markets. Capitalist systems range from laissez-faire, with minimal government regulation and state enterprise, to regulated and social market systems, 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).
In socialist economic system (socialism), production is carried out to produce goods and services directly for use; decisions regarding the use of the means of production are adjusted to satisfy economic demand, investment is determined through economic planning procedures. The means of production are either publicly owned, or are owned cooperatively by their employees. A socialist economic system that features social ownership but is based on the process of capital accumulation and utilizes capital markets for the allocation of capital goods are designated as market socialism.
The basic and general economic systems are:
Capitalism generally features the private ownership of the means of production (capital), and a market economy for coordination. Corporate capitalism refers to a capitalist marketplace characterized by the dominance of hierarchical, bureaucratic corporations.
Mercantilism was the dominant model in Western Europe from the 16th to 18th century. This encouraged imperialism and colonialism until economic and political changes resulted in global decolonization. Modern capitalism has favored free trade to take advantages of increased efficiencies due to national comparative advantage and economies of scale in a larger, more universal market. Some critics have applied the term neo-colonialism to the power imbalance between multi-national corporations operating in a free market vs. seemingly impoverished people in developing countries.
There is no precise definition of a "mixed economy". Theoretically, it may refer to an economic system that combines one of three characteristics: public and private ownership of industry, market-based allocation with economic planning, or free-markets with state interventionism.
In practice, "mixed economy" generally refers to market economies with substantial state interventionism and/or sizable public sector alongside a dominant private sector. Actual mixed economies gravitate more heavily to one end of the spectrum. Notable economic models and theories that have been described as a "mixed economy" include:
Socialist economic systems (all of which feature social ownership of the means of production) can be subdivided by their coordinating mechanism (planning and markets) into planned socialist and market socialist systems. Additionally, socialism can be divided based on their property structures between those that are based on public ownership, worker or consumer cooperatives and common ownership (i.e., non-ownership). Communism is a hypothetical stage of Socialist development articulated by Marx as "second stage Socialism" in Critique of the Gotha Program, whereby economic output is distributed based on need and not simply on the basis of labor contribution.
The original conception of socialism involved the substitution of money as a unit of calculation and monetary prices as a whole with calculation in kind (or valuation based on natural units), with business and financial decisions replaced by engineering and technical criteria for managing the economy. Fundamentally, this meant that socialism would operate under different economic dynamics than those of capitalism and the price system.[10] Later models of socialism developed by neoclassical economists (most notably Oskar Lange and Abba Lerner) were based on the use of notional prices derived from a trial-and-error approach to achieve market clearing prices on the part of a planning agency. These models of socialism were called "market socialism" because they included a role for markets, money and prices.
The primary emphasis of socialist planned economies is to coordinate production is to produce economic output to directly satisfy economic demand as opposed to the indirect mechanism of the profit system where satisfying needs is subordinate to the pursuit of profit; to advance the productive forces of the economy in a more efficient manner while being immune to the perceived systemic inefficiencies (cyclical processes) and crisis of overproduction so that production would be subject to the needs of society as opposed to being ordered around capital accumulation.[11][12]
In a pure socialist planned economy that involves different processes of resource allocation, production and means of quantifying value, the use of money would be replaced with a different measure of value and accounting tool that would embody more accurate information about an object or resource.
In practice, the economic system of the former Soviet Union and Eastern bloc operated as a command economy, featuring a combination of state owned enterprises and central planning using the material balances method. The extent to which these economic systems achieved socialism or represented a viable alternative to capitalism is subject to debate.[13]
In orthodox Marxism, the mode of production is tantamount to the subject of this article, determining with a superstructure of relations the entirety of a given culture or stage of human development.
Corporatism refers to economic tripartite involving negotiations between business, labor, and state interest groups to establish economic policy, or more generally to assigning people to political groups based on their occupational affiliation.
Certain subsets of an economy, or the particular goods, services, techniques of production, or moral rules can also be described as an "economy". For example, some terms emphasize specific sectors or externalizes:
Others emphasize a particular religion:
Karl Marx's theory of economic development was based on the premise of evolving economic systems; specifically, in his view, over the course of history superior economic systems would replace inferior ones. "Inferior" systems were beset by "internal contradictions" and "inefficiencies" that make them "impossible" to survive over the long term. In Marx's scheme, feudalism was replaced by capitalism, which would eventually be superseded by socialism.[14] Joseph Schumpeter had an evolutionary conception of economic development, but unlike Marx, he de-emphasized the role of class struggle in contributing to qualitative change in the economic mode of production. In subsequent world history, Communist states run according to Marxist-Leninist ideologies have either collapsed or gradually reformed their centrally-planned economies toward market-based economies, for example with perestroika and the dissolution of the Soviet Union, Chinese economic reform, and Đổi Mới in Vietnam.
Mainstream evolutionary economics continues to study economic change in modern times. There has also been renewed interest in understanding economic systems as evolutionary systems in the emerging field of Complexity economics.
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.
Various strains of anarchism advocate different economic systems, all of which have very small or no government involvement. These include:
Libertarianism also advocates a minimal role for government, including economic systems like:
(merge in progress)
Unsorted:
Means of production, Adam Smith, Karl Marx, Industrial revolution, Neoliberalism
Anarchism, Social democracy, Means of production, Libertarian socialism, Communist Party of the Soviet Union
Macroeconomics, Microeconomics, Adam Smith, Game theory, Utility
Anarchism, Industrial Workers of the World, Libertarian socialism, Green anarchism, Revolutions of 1848
Economics, John Maynard Keynes, Great Depression, Adam Smith, John Locke
Economics, Economic history, Classical economics, Capitalism, Econometrics
Economics, Industrial Revolution, Technology, Economic history, Finance
Sociology, Economics, Political science, Psychology, History
Capitalism, Christian democracy, United Kingdom, Social democracy, Means of production
Science, Cybernetics, Control theory, Systems biology, Systems engineering