May 19, by Will Gemma There are four primary types of economic systems in the world:
All of them rely on a different set of assumptions and conditions and of course, they all have their own strengths and weaknesses. We will look at each of them in more detail below.
In other words, traditional economic systems are the most basic and ancient type of economies. Large parts of the world still qualify as traditional economies. However, the relatively primitive processes are often much more sustainable and the low output results in much less waste than we see in any command, market, or mixed economy.
Command Economic System A command economic system is characterized by a dominant centralized power usually the government that controls a large part of all economic activity. This type of economy is most commonly found in communist countries.
It is sometimes also referred to as a planned economic system, because most production decisons are made by the government i. Economies that have access to large amounts of valuable resources are especially prone to establish a command economic system.
In those cases the government steps in to regulate the resources and most processes surrounding them. In practice, the centralized control aspect usually only covers the most valuable resources within the economy e.
Other parts, such as agriculture are often left to be regulated by the general population. However, this is unfortunately not always the case.
In addition to that, command economies are less flexible than the other systems and react slower to changes, because of their centralized nature. Market Economic System A market economic system relies on free markets and does not allow any kind of government involvement in the economy. In this system, the government does not control any resources or other relevant economic segments.
The market economic system is a theoretical concept. The reason for this is that all economies we know of show characteristics of at least some kind of government interference.
For example, many governments pass laws to regulate monopolies or to ensure fair trade and so on.
In theory, a market economic system enables an economy to experience a high amount of growth. In addition to that, it also ensures that the economy and the government remain separate.
Thus, the distribution of wealth and other positive aspects of the high economic output may not always be beneficial for society as a whole. Mixed Economic System A mixed economic system refers to any kind of mixture of a market and a command economic system. It is sometimes also referred to as a dual economy.
Although there is no clear-cut definition of a mixed economic system, in most cases the term is used to describe market economies with a strong regulatory oversight and government control in specific areas e.
Most western economies nowadays are considered mixed economies. Most industries in those systems are privately owned whereas a small number of public utilities and services remain in government control. Thus, neither the private nor the government sector alone can maintain the economy, both play a critical part in the success of the system.
Mixed economies are widely considered an economic ideal nowadays. In theory, they are supposed combine the advantages of both command and market economic systems. The extent of government control varies greatly and some governments tend to increase their power more than necessary.
In a Nutshell There are four types of economic systems; traditional, command, market and mixed economies. A traditional economic system focuses exclusively on goods and services that are directly related to its beliefs and traditions. A command economic system is characterized by a dominant centralized power.Database of FREE Economics essays - We have thousands of free essays across a wide range of subject areas.
Sample Economics essays! The world’s economic systems fall into one of four main categories: Traditional economy Capitalism economy Socialism economy Mixed economy.
However, there are unlimited variations of each type. An economic system must define what to produce, how to produce it and for whom to produce it. Understanding Different Types of Economic Systems - GH POSITION PAPER Question: Between the mixed economy and communism, which economic system is better.
Why. The purpose of writing this paper is to gain knowledge and better understanding of different types of economic systems. The Four Types of Economic Systems As you probably know, there are countless economies across the world.
All of them are unique in their own way, but they still share a significant number of characteristics. Economic systems were make to help many countries leader make good decisions on natural and scarce resources, On deciding upon these source the leaders use these economic systems to help distribute the scare resources to the people of their own country.3/5(5).
There are four completely different types of economic systems; traditional, command, market, and mixed economies. “Most countries have a mix of three different types of economic systems ”.(Clayton 55) India is a worthy example of mixing the three main economic systems by combining elements of a traditional, command, and market .