An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entities, decision-making processes and patterns of consumption that comprise the economic structure of a given community. As such, an economic system is a type of social system. The mode of production is a related concept. All economic systems have three basic questions to ask: what to produce, how to produce and in what quantities and who receives the output 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). The analysis of economic systems traditionally focused on the dichotomies and comparisons between market economies and planned economies and on the distinctions between capitalism and socialism. Subsequently, the categorization of economic systems expanded to include other topics and models that do not conform to the traditional dichotomy. Today the dominant form of economic organization at the world level is based on market-oriented mixed economies.
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, which include the following subcategories of different systems:
There are multiple components to an economic system. 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. An economic system is a system of production, resource allocation, exchange and distribution of goods and services in a society or a given geographic area. In one view, every economic system represents an attempt to solve three fundamental and interdependent problems:
Every economy is thus 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. 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.
Economic systems are commonly segmented by their property rights regime for the means of production and by their dominant resource allocation mechanism. Economies that combine private ownership with market allocation are called "market capitalism" and economies that combine private ownership with economic planning are labelled "command capitalism" or dirigisme. Likewise, systems that mix public or cooperative ownership of the means of production with economic planning are called "socialist planned economies" and systems that combine public or cooperative ownership with markets are called "market socialism". Some perspectives build upon this basic nomenclature to take other variables into account, 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. Instead of looking at nominal ownership, this perspective takes into account the organizational form within economic enterprises.
In a capitalist economic system, production is carried out for private profit and decisions regarding investment and allocation of factor inputs are determined by business owners in factor markets. The means of production are primarily owned by private enterprises and decisions regarding production and investment are 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 aims of ameliorating market failures (see economic intervention) or supplementing the private marketplace with social policies to promote equal opportunities (see welfare state), respectively.
In socialist economic systems (socialism), production for use is carried out; decisions regarding the use of the means of production are adjusted to satisfy economic demand; and investment is determined through economic planning procedures. There is a wide range of proposed planning procedures and ownership structures for socialist systems, with the common feature among them being the social ownership of the means of production. This might take the form of public ownership by all of the society, or ownership cooperatively by their employees. A socialist economic system that features social ownership, but that it is based on the process of capital accumulation and utilization of capital markets for the allocation of capital goods between socially owned enterprises falls under the subcategory of market socialism.
The basic and general "modern" economic systems segmented by the criterium of resource allocation mechanism are:
Other related types:
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:
The type of labour power:
Or the means of production:
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 efficiency 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. Actually, 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 the following:
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 Karl Marx as "second stage socialism" in Critique of the Gotha Program, whereby the 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 a 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. 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 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; and 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.
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.
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. 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 and so on. 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.
Economic system – A set of institutions for decision making and for the implementation of decisions concerning production, income, and consumption within a given geographic area.
Chapter 1 presents definitions and basic examples of the categories used in this book: tradition, market, and command for allocative mechanisms and capitalism and socialism for ownership systems.
This leads us to describe two extreme categories: market capitalism and command socialism. But this simple dichotomization raises the possibility of “cross forms,”, namely, market socialism and command capitalism. Although less common than the previous two, both have existed.
Indeed, aside from the variation of ownership forms, some follow certain ideas in Marx, saying that how one class relates to another is the crucial matter rather than specifically who owns what, with true socialism involving a lack of exploitation of one class by another. This kind of argument can lead to the position that the Soviet Union was not really socialist but a form of state capitalism in which the government leaders exploited the workers.
According to nineteenth-century socialist views, socialism would function without capitalist economic categories – such as money, prices, interest, profits and rent – and thus would function according to laws other than those described by current economic science. While some socialists recognized the need for money and prices at least during the transition from capitalism to socialism, socialists more commonly believed that the socialist economy would soon administratively mobilize the economy in physical units without the use of prices or money.
The Christian Democratic Party (Spanish: Partido Demócrata Cristiano, PDC) is a Christian democratic political party in Chile and governs as part of the Nueva Mayoría coalition.
It is led by Carolina Goic. The former president of Chile, Michelle Bachelet is from another party in the coalition, the Socialist Party. There have been three Christian Democrat presidents in the past, Eduardo Frei Ruiz-Tagle, Patricio Aylwin, and Eduardo Frei Montalva.
Customarily, the PDC backs specific initiatives in an effort to bridge socialism and laissez-faire capitalism. This economic system has been called "social capitalism" and is heavily influenced by Catholic social teaching or, more generally, Christian ethics. In addition to this objective, the PDC also supports a strong national government while conservative on social issues. However, after Pinochet's military regime ended the PDC embraced classical economic policies. The current president of the PDC is Ignacio Walker. In their latest "Ideological Congress", the Christian Democrats criticized Chile's current economic system and called for a shift toward a social market economy (economía social de mercado), the economic system created by the post-World War II christian democratic governments in Europe. However, unlike European countries which Christian Democrats usually as a conservative party, the PDC has long cooperated with the centre-left parties.Communist society
In Marxist thought, communist society or the communist system is the type of society and economic system postulated to emerge from technological advances in the productive forces, representing the ultimate goal of the political ideology of communism. A communist society is characterized by common ownership of the means of production with free access to the articles of consumption and is classless and stateless, implying the end of the exploitation of labour.Communism is a specific stage of socioeconomic development predicated upon a superabundance of material wealth, which is postulated to arise from advances in production technology and corresponding changes in the social relations of production. This would allow for distribution based on need and social relations based on freely-associated individuals.The term communist society should be distinguished from the Western concept of the communist state, the latter referring to a state ruled by a party which professes a variation of Marxism–Leninism.East Asian model of capitalism
The East Asian model (sometimes known as state-sponsored capitalism) is an economic system where the government invests in certain sectors of the economy in order to stimulate the growth of new (or specific) industries in the private sector. It generally refers to the model of development pursued in East Asian economies such as Hong Kong, Macau, Japan, South Korea and Taiwan. It has also been used to classify the contemporary economic system in Mainland China since the Deng Xiaoping's economic reforms during the late 1970s.Key aspects of the East Asian model include state control of finance, direct support for state-owned enterprises in strategic sectors of the economy or the creation of privately owned national champions, high dependence on the export market for growth and a high rate of savings. It is similar to dirigisme.
This economic system differs from a centrally planned economy, where the national government would mobilize its own resources to create the needed industries which would themselves end up being state-owned and operated. East Asian model of capitalism refers to the high rate of savings and investments, high educational standards, assiduity and export-oriented policy.Economic secession
Economic secession has been variously defined by sources. In its narrowest sense, it is abstention from the state’s economic system – for instance by replacing the use of government money with barter, Local Exchange Trading Systems, or commodity money (such as gold). Wendell Berry may have coined the term "economic secession." He promoted his own version in his 1991 essay Conservation and Local Economy. John T. Kennedy used the term to refer to all human action that is forbidden by the State; he explains economic secession as tax avoidance or refusal to follow regulations as a method to reduce government control.
Samuel Edward Konkin III used the term "counter-economics" to refer to a similar concept.Economic secession takes government out of the equation when making economic decisions. Trading happens through payment in-kind, cash and barter.Economic secession is a way for the individuals to withdraw their wealth for both economic and political reasons. If individuals disagree with the use of tax money to fund a political agenda, they use economic secession as a means of privately protesting the control of government in their lives. The opinion that government is too involved in society fuels individuals to withdraw economically and view their withdrawal from the government system as a moral stand.Economy of Tajikistan
Since independence, Tajikistan gradually followed the path of transition economy, reforming its economic policies. With foreign revenue precariously dependent upon exports of cotton and aluminium, the economy is highly vulnerable to external shocks. Tajikistan's economy also incorporates a massive black market, primarily focused on the drug trade with Afghanistan, and heroin trafficking in Tajikistan is estimated to be equivalent 30-50% of national GDP as of 2012. In fiscal year (FY) 2000, international assistance remained an essential source of support for rehabilitation programs that reintegrated former civil war combatants into the civilian economy, thus helping keep the peace. International assistance also was necessary to address the second year of severe drought that resulted in a continued shortfall of food production. Tajikistan's economy grew substantially after the war. The gross domestic product (GDP) of Tajikistan expanded at an average rate of 9.6% over the period of 2000-2007 according to the World Bank data. This improved Tajikistan's position among other Central Asian countries (namely Turkmenistan and Uzbekistan), which have degraded economically ever since. As of August 2009, an estimated 60% of Tajikistani citizens live below the poverty line. The 2008 global financial crisis has hit Tajikistan hard, both domestically and internationally. Tajikistan has been hit harder than many countries because it already has a high poverty rate and because many of its citizens depend on remittances from expatriate Tajikistanis.Government
A government is the system or group of people governing an organized community, often a state.In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is a means by which organizational policies are enforced, as well as a mechanism for determining policy. Each government has a kind of constitution, a statement of its governing principles and philosophy. Typically the philosophy chosen is some balance between the principle of individual freedom and the idea of absolute state authority (tyranny).
While all types of organizations have governance, the word government is often used more specifically to refer to the approximately 200 independent national governments on Earth, as well as subsidiary organizations.Historically prevalent forms of government include monarchy, aristocracy, timocracy, oligarchy, democracy, theocracy and tyranny. The main aspect of any philosophy of government is how political power is obtained, with the two main forms being electoral contest and hereditary succession.
Libertarianism and anarchism are political ideologies that seeks to limit or abolish government, finding government disruptive to self organization and freedom.Latin American Economic System
The Latin American and the Caribbean Economic System, officially known as Sistema Económico Latinoamericano y del Caribe (SELA), is an organization founded in 1975 to promote economic cooperation and social development between Latin American and the Caribbean countries. In the early 1990s, its representatives consisted of members from 28 countries and took part in the General Agreement on Tariffs and Trade (GATT) negotiations, which led to a new global agreement on restrictions on trade and established the World Trade Organization (WTO).
The Latin American Council represents SELA's policy-making body and meets once a year. The main administrative body is the secretariat, located in Caracas, Venezuela.Market economy
A market economy is an economic system in which the decisions regarding investment, production and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.Market economies range from minimally regulated free market and laissez-faire systems where state activity is restricted to providing public goods and services and safeguarding private ownership, to interventionist forms where the government plays an active role in correcting market failures and promoting social welfare. State-directed or dirigist economies are those where the state plays a directive role in guiding the overall development of the market through industrial policies or indicative planning—which guides yet does not substitute the market for economic planning—a form sometimes referred to as a mixed economy.Market economies are contrasted with planned economies where investment and production decisions are embodied in an integrated economy-wide economic plan. In a planned economy, economic planning is the principal allocation mechanism between firms rather than markets, with the economy's means of production being owned and operated by a single organizational body.National Development and Reform Commission
The National Development and Reform Commission of the People's Republic of China (NDRC), formerly State Planning Commission and State Development Planning Commission, is a macroeconomic management agency under the State Council, which has broad administrative and planning control over the economy. It has reputation of being the "mini-state council"The candidate for the chairperson of the NDRC is nominated by the Premier of the People's Republic of China and approved by the National People's Congress. Since February 2017 the Commission has been headed by He Lifeng.
The NDRC's functions are to study and formulate policies for economic and social development, maintain the balance of economic development, and to guide restructuring of the economic system. The NDRC has twenty-six functional departments/bureaus/offices with an authorized staff size of 890 civil servants.Planned economy
A planned economy is a type of economic system where investment, production and the allocation of capital goods take place according to economy-wide economic and production plans. A planned economy may use centralized, decentralized or participatory forms of economic planning. Planned economies contrast with unplanned economies, specifically market economies, where autonomous firms operating in markets make decisions about production, distribution, pricing and investment. Market economies that use indicative planning are sometimes referred to as planned market economies.
A command economy or administrative command economy describes a country using Soviet-type economic planning which was characteristic of the former Soviet Union and Eastern Bloc before most of these countries converted to market economies. These terms highlight the central role of hierarchical administration and public ownership of production in guiding the allocation of resources in these economic systems. In command economies, important allocation decisions are made by government authorities and are imposed by law.Central planning has been used in the majority of countries adopting socialism including those based on the Soviet model, though a minority have adopted some degree of market socialism, such as the Socialist Federal Republic of Yugoslavia. Non-market socialism replaces factor markets with direct calculation as the means to coordinate the activities of the various socially owned economic enterprises that make up the economy. More recent approaches to socialist planning and allocation have come from some economists and computer scientists proposing planning mechanisms based on advances in computer science and information technology.Rural development
Rural development is the process of improving the quality of life and economic well-being of people living in rural areas, often relatively isolated and sparsely populated areas.Rural development has traditionally centered on the exploitation of land-intensive natural resources such as agriculture and forestry. However, changes in global production networks and increased urbanization have changed the character of rural areas. Increasingly tourism, niche manufacturers, and recreation have replaced resource extraction and agriculture as dominant economic drivers. The need for rural communities to approach development from a wider perspective has created more focus on a broad range of development goals rather than merely creating incentive for agricultural or resource based businesses. Education, entrepreneurship, physical infrastructure, and social infrastructure all play an important role in developing rural regions. Rural development is also characterized by its emphasis on locally produced economic development strategies. In contrast to urban regions, which have many similarities, rural areas are highly distinctive from one another. For this reason there are a large variety of rural development approaches used globally.Rural development is a comprehensive term. It essentially focuses on action for the development of areas outside the mainstream urban economic system. we should think of what type of rural development is needed because modernization of village leads to urbanization and village environment disappears.Social peer-to-peer processes
Social peer-to-peer processes are interactions with a peer-to-peer dynamic. These peers can be humans or computers. Peer-to-peer (P2P) is a term that originated from the popular concept of the P2P distributed computer application architecture which partitions tasks or workloads between peers. This application structure was popularized by file sharing systems like Napster, the first of its kind in the late 1990s.
The concept has inspired new structures and philosophies in many areas of human interaction. P2P human dynamic affords a critical look at current authoritarian and centralized social structures. Peer-to-peer is also a political and social program for those who believe that in many cases, peer-to-peer modes are a preferable option.Socialist-oriented market economy
The socialist-oriented market economy (Vietnamese: Kinh tế thị trường theo định hướng xã hội chủ nghĩa) is the official title given to the current economic system in the Socialist Republic of Vietnam. It is described as a multi-sectoral market economy where the state sector plays the decisive role in directing economic development, with the eventual long-term goal of developing socialism.The socialist-oriented market economy is a product of the Đổi Mới economic reforms which led to the replacement of the centrally planned economy with a market-based mixed economy based on the predominance of state-owned industry. These reforms were undertaken to allow Vietnam to integrate with the global market economy. The term "socialist-oriented" is used to highlight the fact that Vietnam has not yet achieved socialism and is in the process of building the basis for a future socialist system. The economic model is similar to the socialist market economy employed in the People's Republic of China.Socialist economics
Socialist economics comprises the economic theories, practices, and norms of hypothetical and existing socialist economic systems.
A socialist economic system is characterised by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use. Socialist systems that utilize markets for allocating inputs and capital goods among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.The term "socialist economics" may also be applied to the analysis of former and existing economic systems that were implemented in socialist states, such as in the works of Hungarian economist János Kornai.Socialist economics has been associated with different schools of economic thought. Marxian economics provided a foundation for socialism based on analysis of capitalism, while neoclassical economics and evolutionary economics provided comprehensive models of socialism. During the 20th century, proposals and models for both planned economies and market socialism were based heavily on neoclassical economics or a synthesis of neoclassical economics with Marxian or institutional economics.Socialist market economy
The socialist market economy (SME) is the economic system and model of economic development employed in the People's Republic of China. The system is based on the predominance of public ownership and state-owned enterprises within a market economy. The term "socialist market economy" was introduced by Jiang Zemin during the 14th National Congress of the Communist Party of China in 1992 to describe the goal of China's economic reforms. Originating in the Chinese economic reforms initiated in 1978 that integrated China into the global market economy, the socialist market economy represents a preliminary or "primary stage" of developing socialism. Despite this, many Western commentators have described the system as a form of state capitalism.South-Central Colorado
South-Central Colorado is a region of the U.S. state of Colorado. It can be roughly defined by Chaffee County in the northwest, El Paso County in the northeast, Las Animas County in the southeast, and Conejos County in the southwest. Some notable towns and cities there include Colorado Springs, Pueblo, Cripple Creek, Cañon City, Salida, Buena Vista, Monte Vista, Alamosa, Walsenburg, and Trinidad. The landscapes of South-Central Colorado were made known to the Western world by the explorations of Zebulon Pike and Kit Carson, who were later followed by settlers, many of whom came by the Santa Fe Trail. The upper tributaries of the Arkansas River and South Platte River provide ample whitewater rafting and are famous for trout and bass fishing in scenic settings such as Royal Gorge. Much of the local economic system is dependent on mining, forestry, ranching, and tourism related to these endeavors. South-Central Colorado has so far largely escaped urbanization, allowing visitors to experience something of the American Old West.System
A system is a group of interacting or interrelated entities that form a unified whole. A system is delineated by its spatial and temporal boundaries, surrounded and influenced by its environment, described by its structure and purpose and expressed in its functioning. Systems are the subjects of study of systems theory.Technological paradigm
A concept of technological paradigm, as explained by Hemanth Tambde combines a set of interrelated and pervasive radical innovations. For instance, when important technological innovations which are originally produced in a specific branch of the economy are constellated, pervasive effects on other economic system sectors might occur and be prolonged.Traditional economy
Traditional economy is an economic system in which traditions, customs, and beliefs help shape the goods and services the economy produces, as well as the rules and manner of their distribution. Countries that use this type of economic system are often rural and farm-based. Also known as a subsistence economy, a traditional economy is defined by bartering and trading. A little surplus is produced and if any excess goods are made, they are typically given to a ruling authority or landowner.
A pure traditional economy has had no changes in how it operates (there are few of these today). Examples of these traditional economies include those of the Inuit or those of the tea plantations in South India. Traditional economies are popularly conceived of as "primitive" or "undeveloped" economic systems, having tools or techniques seen as outdated. As with the notion of contemporary primitiveness and with modernity itself, the view that traditional economies are backward is not shared by scholars in economics and anthropology. Two current examples of a traditional or custom based economy are Bhutan and Haiti.
Traditional economies may be based on custom and tradition, with economic decisions based on customs or beliefs of the community, family, clan, or tribe.
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