Ch. 26 Comparing Economic Systems Section 2 Economic Systems.
Economic Systems
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Transcript of Economic Systems
ECONOMIC SYSTEMS
Economic systems are connected with political ideology. Economic systems vary in different countries some have free market economies. Others have strict market economies. There are three main types of economic systems: Market, command and mixed.
Economic Systems
MARKET ECONOMY - advocates forces within a competitive market, which constitute the "invisible hand", to determine how resources should be allocated.
COMMAND ECONOMY - relies on the government to decide how the country's resources would best be allocated.
COMMAND ECONOMY
MARKET ECONOMY
Basic and general economic systems are:
Market economy ("hands off" systems, such as Laissez-faire capitalism) Mixed economy (a hybrid that blends some aspects of both market and
planned economies) Traditional economy (an economy based on custom and tradition or
command. Economic decisions are based on the traditions of community, family or religion.)
Barter economy (where goods and services are directly exchanged for other goods or services)
Participatory economics (a system where the production and distribution of goods is guided by public participation)
Gift economy (where an exchange is made without any explicit agreement for immediate or future rewards) informal custom governs gift exchange, rather than negotiated pricing
Command (Centrally Planned or Socialist) Economic Systems
All productive activities are privately owned. The public has the right to enter any market and control the production of their goods and services.
MARKET ECONOMY
The goods and services that a country produces are not planned by anyone. Production is determined by interaction of supply and demand. If supply is greater than demand prices decrease but if demand is greater than supply prices increase.
The role of the government is to encourage free and fair competition between owners. Also to outlaw monopolies and restrictive business practices. Such laws as the antitrust laws have been established.
LAISSEZ-FAIRE "let [them] do", "let it be", or "leave it alone."An economic environment in which transactions between private parties are free from tariffs, government subsidies, and enforced monopolies, with only enough government regulations sufficient to protect property rights against theft and aggression.
COMMAND/ SOCIALIST ECONOMYaims to coordinate production in order to
directly satisfy human needs/economic demandversus
generate profit and satisfy needs as a byproduct of pursuing profit
to advance the productive forces of the economy while being immune to the systemic inefficiencies (cyclical processes) and crisis of overproduction that plagues
capitalism so that production would be subject to the needs of society as opposed to being ordered around
capital accumulation.
The government plans the goods and services that a country produces. Also the government sets regulations on how much to produce and determine the price to sell. Objective of a command economy is for the government to allocate resources for the better of society. All businesses are state owned. Investments can be made only if they are in the best interest of the economy as a whole. None are made that are in best interest of individuals. As the governments believe they should get better as a whole.Objective of a command economy is to mobilize economic resources for public good. Abolition of private ownership means there is no incentive for individuals to look for better ways to serve consumer needs.
The Command Economy
COMMUNISM
A hypothetical stage of Socialist development articulated by Karl Marx as "second stage Socialism", whereby economic output is
distributed based on need and not simply on the basis of labor
contribution.
PARTICIPATORY ECONOMICS ”parecon”
All persons should have a say in decisions proportionate to the degree to which they are affected by them.
SELF-MANAGEMENT
Replaces the mainstream economic conception of economic freedom, which is criticized that by its very vagueness has allowed it to be
abused by capitalist ideologues.
Workers make decisions about what to do in the workplace, where workers have say in proportion to how much they are affected by a
decision.
GIFT ECONOMY
Open-source software projectsThe Linux kernel and the GNU operating system are
prototypical examples for the gift economy's prominence in the technology sector and its active role in instating the use of permissive free software
and copyleft licenses, which allow free reuse of software and knowledge.
Other examples include: file-sharing, the commons, open access