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Economic System

By: Ahmad Waleed Nawab
www.ahmadwaleednawab.webs.com
Economic System
An organized way in which a state or
nation allocates its resources and
apportions goods and services in the
national community.
Contents
• 1 Components
• 2 Types
– 2.1 Types of socialist systems
– 2.2 Types of mixed economies

• 3 Evolutionary economics
• 4 Context in society
• 5 List of economic systems
Economic System
• An economic system is the combination of the
various institutions, agencies, consumers, entities
(or even sectors as described by some authors)
that comprise the economic structure of a given
society or community. It also 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).
Economic System
• A related concept is the mode of production.
• The economic system involves production,
allocation of economic inputs, distribution of
economic outputs, land availability,
households (earnings and expenditure
consumption of goods and services in an
economy), financial institutions and
government policies. It involves a set of
institutions and their various social relations.
Economic System
• Alternatively, it is the set of principles by which
problems of economics are addressed, such as
the economic problem of scarcity through
allocation of finite productive resources.[1] An
economic system is composed of people,
institutions, rules, and relationships. For example,
the convention of property, the institution of
government, or the employee-employer
relationship.
Economic System
• Examples of contemporary economic
systems include capitalist systems, socialist
systems, and mixed economies. Today the
world largely operates under a global
economic system based on the capitalist
mode of production.
• "Economic systems" is the economics
category that includes the study of such
systems. It includes comparative economic
systems as a subfield.
Components
• There are multiple components to economic
systems. Decision-making structures of an
economy determine the use of economic inputs
(the means of production), distribution of
output, the level of centralization in decisionmaking, and who makes these decisions.
Decisions might be carried out by industrial
councils, by a government agency, or by private
owners.
Components
• Some aspects of these structures include:
• Coordination mechanism: How information
is obtained and used to coordinate
economic activity. The two dominant forms
of coordination include planning and the
market; planning can be either centralized
or de-centralized, and the two mechanisms
are not mutually exclusive.
Components
• Productive property rights: This refers to
ownership (rights to the proceeds of output
generated) and control over the use of the means
of production. They may be owned privately, by
the state, by those who use it, or held in
common by society.
• Incentive system: A mechanism for inducing
certain economic agents to engage in productive
activity; it can be based on either material
reward (compensation) or moral reward (social
prestige).[2]
Types of Economic System
• Marxist-Leninist Communist states (red) and formerly
Communist-run (orange) countries of the world.
• 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.[3]
Types of Economic System
• Economic systems can be divided by the
way they allocate economic inputs (the
means of production) and how they make
decisions regarding the use of inputs. A
common distinction of great importance is
that between capitalism (a market
economy) and socialism (economic
planning).
Types of Economic System
• In a capitalist economic system, production is
carried out to maximize private profit, decisions
regarding investment and the use of the means
of production are determined by competing
business owners in the marketplace; production
takes place within the process of capital
accumulation. The means of production are
owned primarily by private enterprises and
decisions regarding production and investment
determined by private owners in capital markets.
Types of Economic System
• 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).
Types of Economic System
• In a socialist economic system, production is
carried out to directly satisfy economic demand
by producing goods and services for use;
decisions regarding the use of the means of
production are adjusted to satisfy economic
demand, investment (control over the surplus
value) is carried out through a mechanism of
inclusive collective decision-making. The means
of production are either publicly owned, or are
owned by the workers cooperatively.
Types of Economic System
• A socialist economic system that is based
on the process of capital accumulation, but
seeks to control or direct that process
through state ownership or cooperative
control to ensure stability, equality or
expand decision-making power, are market
socialist systems.
Types of socialist systems
• Economic systems can be subdivided by their
coordinating mechanism (planning and markets) into
planned socialist market socialist systems. Additionally,
socialism can be divided based on the ownership of the
means of production into 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.
Types of socialist systems
• The primary concern for socialist planned
economies is to coordinate production to directly
satisfy human needs/economic demand (as
opposed to 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.[4][5]
Types of socialist systems
• 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.
Types of Economic System
• The 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)
• Planned economy ("hands on" systems,
such as state socialism or state capitalism)
Types of socialist systems
• Traditional economy (a generic term for older
economic systems)
• Command (Centrally Planned) Economic Systems:
(a generic term for older economic systems)
• 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)
• Barter economy (where goods and services are
directly exchanged for other goods or services)
Types of socialist systems
•
•
•
•
•
•
•
•
•
•

Planned systems
Calculation in kind
Decentralized planning (economics)
Planned economy
State socialism
Market systems
Market socialism
Socialist market economy
Mutualism (economic theory)
Economic democracy
Types of mixed economies
• Economic systems that contain substantial state,
private and sometimes cooperative ownership
and operated in mixed economies - i.e., ones that
contain substantial amounts of both market
activity and economic planning.
• Distributism - Catholic ideal of a "third way"
economy, featuring more distributed ownership
Types of mixed economies
• Georgism - socialized rents on land
• Mixed economy
–
–
–
–
–
–
–
–
–
–

American School
Dirigisme
Nordic model
Japanese system
Mercantilism
Social market economy also known as Soziale Marktwirtschaft
Social corporatism
Socialist-oriented market economy
Progressive utilization theory
Indicative planning also known as a planned market economy
Evolutionary economics
•
• Karl Marx's theory of economic development was based
on the premise of evolving economic systems; specifically,
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.[2] 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
Context in society
• 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.

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Economic system

  • 1. Economic System By: Ahmad Waleed Nawab www.ahmadwaleednawab.webs.com
  • 2. Economic System An organized way in which a state or nation allocates its resources and apportions goods and services in the national community.
  • 3. Contents • 1 Components • 2 Types – 2.1 Types of socialist systems – 2.2 Types of mixed economies • 3 Evolutionary economics • 4 Context in society • 5 List of economic systems
  • 4. Economic System • An economic system is the combination of the various institutions, agencies, consumers, entities (or even sectors as described by some authors) that comprise the economic structure of a given society or community. It also 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).
  • 5. Economic System • A related concept is the mode of production. • The economic system involves production, allocation of economic inputs, distribution of economic outputs, land availability, households (earnings and expenditure consumption of goods and services in an economy), financial institutions and government policies. It involves a set of institutions and their various social relations.
  • 6. Economic System • Alternatively, it is the set of principles by which problems of economics are addressed, such as the economic problem of scarcity through allocation of finite productive resources.[1] An economic system is composed of people, institutions, rules, and relationships. For example, the convention of property, the institution of government, or the employee-employer relationship.
  • 7. Economic System • Examples of contemporary economic systems include capitalist systems, socialist systems, and mixed economies. Today the world largely operates under a global economic system based on the capitalist mode of production. • "Economic systems" is the economics category that includes the study of such systems. It includes comparative economic systems as a subfield.
  • 8. Components • There are multiple components to economic systems. Decision-making structures of an economy determine the use of economic inputs (the means of production), distribution of output, the level of centralization in decisionmaking, and who makes these decisions. Decisions might be carried out by industrial councils, by a government agency, or by private owners.
  • 9. Components • Some aspects of these structures include: • Coordination mechanism: How information is obtained and used to coordinate economic activity. The two dominant forms of coordination include planning and the market; planning can be either centralized or de-centralized, and the two mechanisms are not mutually exclusive.
  • 10. Components • Productive property rights: This refers to ownership (rights to the proceeds of output generated) and control over the use of the means of production. They may be owned privately, by the state, by those who use it, or held in common by society. • Incentive system: A mechanism for inducing certain economic agents to engage in productive activity; it can be based on either material reward (compensation) or moral reward (social prestige).[2]
  • 11. Types of Economic System • Marxist-Leninist Communist states (red) and formerly Communist-run (orange) countries of the world. • 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.[3]
  • 12. Types of Economic System • Economic systems can be divided by the way they allocate economic inputs (the means of production) and how they make decisions regarding the use of inputs. A common distinction of great importance is that between capitalism (a market economy) and socialism (economic planning).
  • 13. Types of Economic System • In a capitalist economic system, production is carried out to maximize private profit, decisions regarding investment and the use of the means of production are determined by competing business owners in the marketplace; production takes place within the process of capital accumulation. The means of production are owned primarily by private enterprises and decisions regarding production and investment determined by private owners in capital markets.
  • 14. Types of Economic System • 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).
  • 15. Types of Economic System • In a socialist economic system, production is carried out to directly satisfy economic demand by producing goods and services for use; decisions regarding the use of the means of production are adjusted to satisfy economic demand, investment (control over the surplus value) is carried out through a mechanism of inclusive collective decision-making. The means of production are either publicly owned, or are owned by the workers cooperatively.
  • 16. Types of Economic System • A socialist economic system that is based on the process of capital accumulation, but seeks to control or direct that process through state ownership or cooperative control to ensure stability, equality or expand decision-making power, are market socialist systems.
  • 17. Types of socialist systems • Economic systems can be subdivided by their coordinating mechanism (planning and markets) into planned socialist market socialist systems. Additionally, socialism can be divided based on the ownership of the means of production into 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.
  • 18. Types of socialist systems • The primary concern for socialist planned economies is to coordinate production to directly satisfy human needs/economic demand (as opposed to 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.[4][5]
  • 19. Types of socialist systems • 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.
  • 20. Types of Economic System • The 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) • Planned economy ("hands on" systems, such as state socialism or state capitalism)
  • 21. Types of socialist systems • Traditional economy (a generic term for older economic systems) • Command (Centrally Planned) Economic Systems: (a generic term for older economic systems) • 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) • Barter economy (where goods and services are directly exchanged for other goods or services)
  • 22. Types of socialist systems • • • • • • • • • • Planned systems Calculation in kind Decentralized planning (economics) Planned economy State socialism Market systems Market socialism Socialist market economy Mutualism (economic theory) Economic democracy
  • 23. Types of mixed economies • Economic systems that contain substantial state, private and sometimes cooperative ownership and operated in mixed economies - i.e., ones that contain substantial amounts of both market activity and economic planning. • Distributism - Catholic ideal of a "third way" economy, featuring more distributed ownership
  • 24. Types of mixed economies • Georgism - socialized rents on land • Mixed economy – – – – – – – – – – American School Dirigisme Nordic model Japanese system Mercantilism Social market economy also known as Soziale Marktwirtschaft Social corporatism Socialist-oriented market economy Progressive utilization theory Indicative planning also known as a planned market economy
  • 25. Evolutionary economics • • Karl Marx's theory of economic development was based on the premise of evolving economic systems; specifically, 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.[2] 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
  • 26. Context in society • 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.

Editor's Notes

  1. This template can be used as a starter file for a photo album.