Economic System

  • October 10, 2020

A market economy is a system in which economic decisions and pricing are guided by the interactions of citizens and businesses. Mixed economies typically maintain private ownership and control of most of the means of production, but often under government regulation. A mixed economy is an economy organized with some free market elements and some socialistic elements, which lies on a continuum somewhere between pure capitalism and pure socialism.

If everything worked perfectly, a command economy would provide jobs for all of its citizens. However , workers must take whatever jobs the government decides is best. The government sets prices for all products and allocates enough resources to satisfy its people. Social democracies combine elements of both capitalism and socialism. They have achieved high economic growth while maintaining political freedom and personal liberty. Social democracies like the Scandinavian nations are often called controlled capitalist market economies. The word controlled here conveys the idea that their governments either own industries or heavily regulate industries they do not own.

Pressures from society may force the government to assert itself more into some aspects the private sector. A small business owner has to keep his eyes open to these types of changes coming down the road.

Recall that societies can be ranked on a continuum ranging from mostly capitalist to mostly socialist. At one end of the continuum, we have societies characterized by a relatively free market, and at the other end we have those characterized by strict government regulation of the economy. Figure 13. 1 “Capitalism and Socialism Across the Globe” depicts the nations of the world along this continuum. Capitalist nations are found primarily in North America and Western Europe but also exist in other parts of the world. The hallmarks of capitalism, then, are private ownership of the means of production, the pursuit of profit, competition for profit, and the lack of government intervention in this competition. As individuals seek to maximize their own wealth, society as a whole is said to benefit. Goods get produced, services are rendered, people pay for the goods and services they need and desire, and the economy and society as a whole prosper.

Individuals are responsible for making their own decisions regarding if, where, and how hard to work. Brief supplementary readings are provided on subsistence, capitalist, socialist, and Buddhist economies. Students are asked to work in cooperative groups to study and teach each other about these different systems. They are then asked to work individually to imagine what a typical day, and then a special occasion, might be like for a person living in an economy different from their own. Finally, they are asked to compare this with the way they spend their own time. “Students should learn about alternatives to the market system, such as traditional and command economies… should study the strengths and weaknesses of each society and its values regarding the objectives of an economic system. ” The question of how to organize economic institutions is typically not a black-or-white choice between all market or all government, but instead involves a balancing act over the appropriate combination of market freedom and government rules.

Economic System

According to social scientist Tapio Lappi-Seppälä of Finland, a key feature of these social democracies’ economies is that inequality in wealth and income is not generally tolerated. Employers, employees, and political officials are accustomed to working closely to ensure that poverty and its related problems are addressed as much as possible and in as cooperative a manner as possible. The five Scandinavian nations, also called the Nordic nations, are Denmark, Finland, Iceland, Norway, and Sweden. These nations differ in many ways, but they also share many similarities. In particular, they are all social democracies, as their governments own important industries while their citizens enjoy much political freedom. Each nation has the three branches of government with which most people are familiar—executive, judicial, and legislative—and each nation has a national parliament to which people are elected by proportional representation. An economic system in which the government owns several important industries, but much property remains in private hands, and political freedom is widespread.

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