Economic system
Encyclopedia
An economic system is the combination of the various agencies, entities (or even sectors as described by some authors) that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed economy is shown in the flow-diagram.
The economics system involves Production
, allocation of economic inputs, distribution
of economic outputs, Landlords and land availability, households (earnings and expenditure consumption
of goods and services in an economy
. Capitalists, Banks (finance institutions) and Government. It is a set of institutions and their various social relations.
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.
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. 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.
), 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.in the aspects of other things that formally develope the hamber Doo Some aspects of these structures include:
, liberty
, and equality
.
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
).
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 market
s. Capitalist systems range from lassiez-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).
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
. 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
.
The basic and general economic systems are:
and 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 cooperative
s 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.
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.
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.
Planned systems:
Market systems:
'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
. 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
.
, cultural, etc. There is often a strong correlation between certain ideologies
, political system
s 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.
Holmes System
The economics system involves Production
Production, costs, and pricing
The following outline is provided as an overview of and topical guide to industrial organization:Industrial organization – describes the behavior of firms in the marketplace with regard to production, pricing, employment and other decisions...
, allocation of economic inputs, distribution
Distribution (economics)
Distribution in economics refers to the way total output, income, or wealth is distributed among individuals or among the factors of production .. In general theory and the national income and product accounts, each unit of output corresponds to a unit of income...
of economic outputs, Landlords and land availability, households (earnings and expenditure consumption
Consumption (economics)
Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...
of goods and services in an economy
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
. Capitalists, Banks (finance institutions) and Government. It is a set of institutions and their various social relations.
Alternatively, it is the set of principles by which problems of economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
are addressed, such as the economic problem
Economic problem
The economic problem, sometimes called the basic, central or fundamental economic problem, is one of the fundamental economic theories in the operation of any economy. It asserts that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs...
of scarcity
Scarcity
Scarcity is the fundamental economic problem of having humans who have unlimited wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs. Alternatively, scarcity implies that not all of society's goals can be...
through allocation of finite productive resources.
An economic system is composed of people
Person
A person is a human being, or an entity that has certain capacities or attributes strongly associated with being human , for example in a particular moral or legal context...
, institutions, rules, and relationships. For example, the convention
Convention (norm)
A convention is a set of agreed, stipulated or generally accepted standards, norms, social norms or criteria, often taking the form of a custom....
of property
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...
, the institution of government, or the employee-employer relationship. Examples of contemporary economic systems include capitalist systems
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
, socialist systems, and mixed economies. Today the world largely operates under a global economic system based on the capitalist mode of production
Capitalist mode of production
In Marx's critique of political economy, the capitalist mode of production is the production system of capitalist societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world...
.
"Economic systems" is the economics category that includes the study of such systems.
Decision-making structures
The decision-making structures of an economy determine the use of economic inputs (the means of productionMeans of production
Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
), distribution of output, the level of centralization in decision-making, and who makes these decisions. Decisions might be carried out by industrial councils
Industrial democracy
Industrial democracy is an arrangement which involves workers making decisions, sharing responsibility and authority in the workplace. While in participative management organizational designs workers are listened to and take part in the decision-making process, in organizations employing industrial...
, by a government agency, or by private owners.in the aspects of other things that formally develope the hamber Doo 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 planningEconomic planningEconomic planning refers to any directing or planning of economic activity outside the mechanisisms of the market, in an attempt to achieve specific economic or social outcomes. Planning is an economic mechanism for resource allocation and decision-making in contrast with the market mechanism...
and the marketMarket economyA market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
; planning can be either centralized or de-centralized, and the two mechanisms are not mutually exclusive. - Productive Property Rights: This refers to ownership (rights to the proceeds of output generated) and control over the use of the means of productionMeans of productionMeans of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
. They may be owned privatelyPrivate propertyPrivate property is the right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other forms of property. Private property is distinguishable from public property, which refers to assets owned by a state, community or government rather than by...
, by the public, by those who use the propertyWorker cooperativeA worker cooperative is a cooperative owned and democratically managed by its worker-owners. This control may be exercised in a number of ways. A cooperative enterprise may mean a firm where every worker-owner participates in decision making in a democratic fashion, or it may refer to one in which...
, or held in common by all of societyCommon ownershipCommon ownership is a principle according to which the assets of an enterprise or other organization are held indivisibly rather than in the names of the individual members or by a public institution such as a governmental body. It is therefore in contrast to public ownership...
. - 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).
Types
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, growthEconomic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
, liberty
Liberty
Liberty is a moral and political principle, or Right, that identifies the condition in which human beings are able to govern themselves, to behave according to their own free will, and take responsibility for their actions...
, and equality
Equality of outcome
Equality of outcome, equality of condition, or equality of results is a controversial political concept. Although it is not always clearly defined, it is usually taken to describe a state in which people have approximately the same material wealth or, more generally, in which the general conditions...
.
Economic systems can be divided by the way they allocate economic inputs (the means of production
Means of production
Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...
) and how they make decisions regarding the use of inputs. A common distinction of great importance is that between capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
(a market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
) and socialism
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
(economic planning
Economic planning
Economic planning refers to any directing or planning of economic activity outside the mechanisisms of the market, in an attempt to achieve specific economic or social outcomes. Planning is an economic mechanism for resource allocation and decision-making in contrast with the market mechanism...
).
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
Capital accumulation
The accumulation of capital refers to the gathering or amassing of objects of value; the increase in wealth through concentration; or the creation of wealth. Capital is money or a financial asset invested for the purpose of making more money...
. The means of production are owned primarily by private enterprises and decisions regarding production and investment determined by private owners in capital market
Capital market
A capital market is a market for securities , where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets...
s. Capitalist systems range from lassiez-faire, with minimal government regulation and state enterprise, to regulated and social market systems, with the stated aim of ensuring social justice
Social justice
Social justice generally refers to the idea of creating a society or institution that is based on the principles of equality and solidarity, that understands and values human rights, and that recognizes the dignity of every human being. The term and modern concept of "social justice" was coined by...
and a more equitable distribution of wealth
Wealth
Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English wela, which is from an Indo-European word stem...
(see welfare state
Welfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...
) or ameliorating market failures (see economic intervention).
In a socialist economic system, production is carried out to directly satisfy economic demand by producing goods and services for use
Production for use
Production for use is a defining criterion of a socialist economy and distinguishes socialism from capitalism...
; 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
Worker cooperative
A worker cooperative is a cooperative owned and democratically managed by its worker-owners. This control may be exercised in a number of ways. A cooperative enterprise may mean a firm where every worker-owner participates in decision making in a democratic fashion, or it may refer to one in which...
. 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
Market socialism
Market socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public...
.
The basic and general economic systems are:
- Market economyMarket economyA market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
("hands off" systems, such as Laissez-faireLaissez-faireIn economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....
capitalism) - Mixed economyMixed economyMixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
(a hybrid that blends some aspects of both market and planned economies) - Planned economyPlanned economyA planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
("hands on" systems, such as state socialismState socialismState socialism is an economic system with limited socialist characteristics, such as public ownership of major industries, remedial measures to benefit the working class, and a gradual process of developing socialism through government policy...
) - Traditional economyTraditional economyTraditional economy is a catching-all term normally used to describe economic systems that pertain in societies with extensive subsistence agriculture. The term may also be used for any economy that falls outside of popular notions of market and command economies...
(a generic term for older economic systems) - Participatory economicsParticipatory economicsParticipatory economics, often abbreviated parecon, is an economic system proposed primarily by activist and political theorist Michael Albert and radical economist Robin Hahnel, among others. It uses participatory decision making as an economic mechanism to guide the production, consumption and...
(a system where the production and distribution of goods is guided by public participationParticipation (decision making)Participation in social science refers to different mechanisms for the public to express opinions - and ideally exert influence - regarding political, economic, management or other social decisions. Participatory decision making can take place along any realm of human social activity, including...
) - Gift economyGift economyIn the social sciences, a gift economy is a society where valuable goods and services are regularly given without any explicit agreement for immediate or future rewards . Ideally, simultaneous or recurring giving serves to circulate and redistribute valuables within the community...
(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
Socialist economic systems can be subdivided by their coordinating mechanism (planning and markets) into planned socialistEconomic planning
Economic planning refers to any directing or planning of economic activity outside the mechanisisms of the market, in an attempt to achieve specific economic or social outcomes. Planning is an economic mechanism for resource allocation and decision-making in contrast with the market mechanism...
and 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 cooperative
Cooperative
A cooperative is a business organization owned and operated by a group of individuals for their mutual benefit...
s and common ownership
Common ownership
Common ownership is a principle according to which the assets of an enterprise or other organization are held indivisibly rather than in the names of the individual members or by a public institution such as a governmental body. It is therefore in contrast to public 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
Critique of the Gotha Program
The Critique of the Gotha Program is a document based on a letter by Karl Marx written in early May 1875 to the Eisenach faction of the German social democratic movement, with whom Marx and Friedrich Engels were in close association...
, whereby economic output is distributed based on need and not simply on the basis of labor contribution.
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
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...
) and crisis of overproduction
Overproduction
In economics, overproduction, oversupply or excess of supply refers to excess of supply over demand of products being offered to the market...
that plagues capitalism so that production would be subject to the needs of society as opposed to being ordered around capital accumulation.
In orthodox Marxism
Orthodox Marxism
Orthodox Marxism is the term used to describe the version of Marxism which emerged after the death of Karl Marx and acted as the official philosophy of the Second International up to the First World War and of the Third International thereafter...
, the mode of production
Mode of production
In the writings of Karl Marx and the Marxist theory of historical materialism, a mode of production is a specific combination of:...
is tantamount to the subject of this article, determining with a superstructure of relations
Base and superstructure
In Marxist theory, human society consists of two parts: the base and superstructure; the base comprehends the forces and relations of production — employer-employee work conditions, the technical division of labour, and property relations — into which people enter to produce the necessities and...
the entirety of a given culture or stage of human development.
Planned systems:
- Calculation in kindCalculation in kindCalculation in kind is a type of accounting based on physical magnitudes and physical quantities rather than a common unit of accounting for economic calculation. Calculation in kind, or valueless calculation, is often described as the form of calculation that would supersede monetary calculation...
- Indicative planningIndicative planningIndicative planning is a form of central economic planning implemented by a state in an effort to solve the problem of imperfect information in economies and thus increase economic performance...
- Planned economyPlanned economyA planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
- State socialismState socialismState socialism is an economic system with limited socialist characteristics, such as public ownership of major industries, remedial measures to benefit the working class, and a gradual process of developing socialism through government policy...
Market systems:
- Market socialismMarket socialismMarket socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public...
- Socialist market economySocialist market economyThe socialist market economy or socialist market economy with Chinese characteristics is the official term used to refer to the economic system of the People's Republic of China after the reforms of Deng Xiaoping. It is also referred to as socialism with Chinese characteristics...
- Mutualism (economic theory)Mutualism (economic theory)Mutualism is an anarchist school of thought that originates in the writings of Pierre-Joseph Proudhon, who envisioned a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labor in the free market...
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.- DistributismDistributismDistributism is a third-way economic philosophy formulated by such Catholic thinkers as G. K...
- Catholic ideal of a "third way" economy, featuring more distributed ownership - GeorgismGeorgismGeorgism is an economic philosophy and ideology that holds that people own what they create, but that things found in nature, most importantly land, belong equally to all...
- socialized rents on land - Mixed economyMixed economyMixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
- American SchoolAmerican School (economics)The American School, also known as "National System", represents three different yet related constructs in politics, policy and philosophy. It was the American policy for the 1860s to the 1940s, waxing and waning in actual degrees and details of implementation...
- DirigismeDirigismeDirigisme is an economy in which the government exerts strong directive influence. While the term has occasionally been applied to centrally planned economies, where the state effectively controls both production and allocation of resources , it originally had neither of these meanings when...
- Nordic modelNordic modelThe Nordic model refers to the economic and social models of the Nordic countries . This particular adaptation of the mixed market economy is characterised by "universalist" welfare states , which are aimed specifically at enhancing individual autonomy, ensuring the universal provision of basic human...
- Japanese systemJapanese post-war economic miracleThe Japanese post-war economic miracle is the name given to the historical phenomenon of Japan's record period of economic growth following World War II, spurred mainly by Japanese economic policy, in particular through the Ministry of International Trade and Industry...
- MercantilismMercantilismMercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...
- Social market economySocial market economyThe social market economy is the main economic model used in West Germany after World War II. It is based on the economic philosophy of Ordoliberalism from the Freiburg School...
also known as Soziale Marktwirtschaft - Social corporatismSocial corporatismSocial corporatism is a form of economic tripartite corporatism supported by social democratic political parties based upon "social partnership" between capital and labour interest groups as well as between the market economy and state regulation that is considered a compromise to regulate conflict...
- Socialist-oriented market economySocialist-oriented market economyThe socialist-oriented market economy is the official name given to the current economic system in the Socialist Republic of Vietnam, as a product of the Đổi mới economic reforms, which led to the displacement of the centrally-planned economy with a market socialist system based on commodity...
- PROUTPROUTProgressive Utilization Theory or PROUT is a socio-economic theory first mentioned in 1959 and fully outlined in 1962 by Indian philosopher and spiritual leader Prabhat Ranjan Sarkar . PROUT is a social system that claims to overcome the limitations of both capitalism and communism...
also known as Progressive Utilization Theory - Indicative PlanningIndicative planningIndicative planning is a form of central economic planning implemented by a state in an effort to solve the problem of imperfect information in economies and thus increase economic performance...
also known as a planned market economy
- American School
Evolutionary economics
Karl MarxKarl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...
'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
Inefficiency
The term inefficiency has several meanings depending on the context in which its used:*Algorithmic inefficiency - refers to less than optimum computer programs that might exhibit one of more of the symptoms of:** slow execution...
that make them impossible to survive over the long term. In Marx's scheme, feudalism
Feudalism
Feudalism was a set of legal and military customs in medieval Europe that flourished between the 9th and 15th centuries, which, broadly defined, was a system for ordering society around relationships derived from the holding of land in exchange for service or labour.Although derived from the...
was replaced by capitalism
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
, which would eventually be superseded by socialism
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
. Joseph Schumpeter
Joseph Schumpeter
Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...
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
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
, for example with perestroika
Perestroika
Perestroika was a political movement within the Communist Party of the Soviet Union during 1980s, widely associated with the Soviet leader Mikhail Gorbachev...
and the dissolution of the Soviet Union
Dissolution of the Soviet Union
The dissolution of the Soviet Union was the disintegration of the federal political structures and central government of the Union of Soviet Socialist Republics , resulting in the independence of all fifteen republics of the Soviet Union between March 11, 1990 and December 25, 1991...
, Chinese economic reform
Chinese economic reform
The Chinese economic reform refers to the program of economic reforms called "Socialism with Chinese characteristics" in the People's Republic of China that were started in December 1978 by reformists within the Communist Party of China led by Deng Xiaoping.China had one of the world's largest...
, and Đổi Mới in Vietnam.
Mainstream evolutionary economics
Evolutionary economics
Evolutionary economics is part of mainstream economics as well as heterodox school of economic thought that is inspired by evolutionary biology...
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
Complexity economics
Complexity economics is the application of complexity science to the problems of economics. It studies computer simulations to gain insight into economic dynamics, and avoids the assumption that the economy is a system in equilibrium.- Models :...
.
Context in society
An economic system can be considered a part of the social system and hierarchically equal to the law system, political systemPolitical system
A political system is a system of politics and government. It is usually compared to the legal system, economic system, cultural system, and other social systems...
, cultural, etc. There is often a strong correlation between certain ideologies
Ideology
An ideology is a set of ideas that constitutes one's goals, expectations, and actions. An ideology can be thought of as a comprehensive vision, as a way of looking at things , as in common sense and several philosophical tendencies , or a set of ideas proposed by the dominant class of a society to...
, political system
Political system
A political system is a system of politics and government. It is usually compared to the legal system, economic system, cultural system, and other social systems...
s and certain economic systems (for example, consider the meanings of the term "communism
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...
"). Many economic systems overlap each other in various areas (for example, the term "mixed economy
Mixed economy
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
" can be argued to include elements from various systems). There are also various mutually exclusive hierarchical categorizations.
List of economic systems
This list attempts to sort all possible economic systems in alphabetical order, without any division or hierarchization.- American SchoolAmerican School (economics)The American School, also known as "National System", represents three different yet related constructs in politics, policy and philosophy. It was the American policy for the 1860s to the 1940s, waxing and waning in actual degrees and details of implementation...
- AnarchismAnarchismAnarchism is generally defined as the political philosophy which holds the state to be undesirable, unnecessary, and harmful, or alternatively as opposing authority in the conduct of human relations...
- Anarcho-capitalismAnarcho-capitalismAnarcho-capitalism is a libertarian and individualist anarchist political philosophy that advocates the elimination of the state in favour of individual sovereignty in a free market...
- Anarcho-communism
- AutarkyAutarkyAutarky is the quality of being self-sufficient. Usually the term is applied to political states or their economic policies. Autarky exists whenever an entity can survive or continue its activities without external assistance. Autarky is not necessarily economic. For example, a military autarky...
- Barter economy
- Buddhist economy
- CapitalismCapitalismCapitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...
- ColonialismColonialismColonialism is the establishment, maintenance, acquisition and expansion of colonies in one territory by people from another territory. It is a process whereby the metropole claims sovereignty over the colony and the social structure, government, and economics of the colony are changed by...
- CommunismCommunismCommunism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...
- CorporatismCorporatismCorporatism, also known as corporativism, is a system of economic, political, or social organization that involves association of the people of society into corporate groups, such as agricultural, business, ethnic, labor, military, patronage, or scientific affiliations, on the basis of common...
- Corporate capitalismCorporate capitalismCorporate capitalism is a term used in social science and economics to describe a capitalist marketplace characterized by the dominance of hierarchical, bureaucratic corporations, which are legally required to pursue profit....
- Digital economyDigital economyA digital economy is an economy based on electronic goods and services produced by an electronic business and traded through electronic commerce...
- DistributismDistributismDistributism is a third-way economic philosophy formulated by such Catholic thinkers as G. K...
- DirigismeDirigismeDirigisme is an economy in which the government exerts strong directive influence. While the term has occasionally been applied to centrally planned economies, where the state effectively controls both production and allocation of resources , it originally had neither of these meanings when...
- Fascist socializationFascist socializationThe Congress of Verona in November 1943 was the only congress of the Italian Republican Fascist Party, the successor of the National Fascist Party. At the time, the Republican Fascist Party was nominally in charge of the Salò Republic, a small fascist state set up in Northern Italy after the Allies...
- FeudalismFeudalismFeudalism was a set of legal and military customs in medieval Europe that flourished between the 9th and 15th centuries, which, broadly defined, was a system for ordering society around relationships derived from the holding of land in exchange for service or labour.Although derived from the...
- GeorgismGeorgismGeorgism is an economic philosophy and ideology that holds that people own what they create, but that things found in nature, most importantly land, belong equally to all...
- Green economyGreen economyA green economy is one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities - United Nations Environment Programme...
- Hydraulic despotism
- Inclusive democracyInclusive DemocracyInclusive Democracy is a political theory and political project that aims for direct democracy, economic democracy in a stateless, moneyless and marketless economy, self-management and ecological democracy...
- Information economyInformation economyInformation economy is a term that characterizes an economy with an increased emphasis on informational activities and information industry.The vagueness of the term has three major sources...
- Internet economyInternet EconomyThe internet economy conducts business through markets whose infrastructure is based on the Internet and World-Wide Web. An Internet economy differs from a traditional economy in a number of ways, including: communication, market segmentation, distribution costs, and price.- Internet economy...
- Islamic economicsIslamic economicsIslamic economics refers to the body of Islamic studies literature that "identifies and promotes an economic order that conforms to Islamic scripture and traditions," and in the economic world an interest-free Islamic banking system, grounded in Sharia's condemnation of interest...
- Japanese SystemJapanese post-war economic miracleThe Japanese post-war economic miracle is the name given to the historical phenomenon of Japan's record period of economic growth following World War II, spurred mainly by Japanese economic policy, in particular through the Ministry of International Trade and Industry...
- Knowledge economyKnowledge economyThe knowledge economy is a term that refers either to an economy of knowledge focused on the production and management of knowledge in the frame of economic constraints, or to a knowledge-based economy. In the second meaning, more frequently used, it refers to the use of knowledge technologies to...
- Libertarian communismLibertarian communismLibertarian communism is a theory of libertarianism which advocates the abolition of the state and private property, and capitalism in favor of common ownership of the means of production, a direct democracy and self-governance....
- Libertarian socialismLibertarian socialismLibertarian socialism is a group of political philosophies that promote a non-hierarchical, non-bureaucratic, stateless society without private property in the means of production...
- Market economyMarket economyA market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
- Market socialismMarket socialismMarket socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public...
- Marxian economicsMarxian economicsMarxian economics refers to economic theories on the functioning of capitalism based on the works of Karl Marx. Adherents of Marxian economics, particularly in academia, distinguish it from Marxism as a political ideology and sociological theory, arguing that Marx's approach to understanding the...
- MercantilismMercantilismMercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...
- Mixed economyMixed economyMixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
- MutualismMutualism (economic theory)Mutualism is an anarchist school of thought that originates in the writings of Pierre-Joseph Proudhon, who envisioned a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labor in the free market...
- National SocialismEconomy of Nazi GermanyWorld War I and the subsequent Treaty of Versailles with its severe reparations imposed on Germany led to a decade of economic woes, including hyperinflation in the mid 1920s...
- Natural economyNatural economyNatural economy refers to a type of economy in which money is not used in the transfer of resources among people. It is a system of allocating resources through direct bartering, entitlement by law, or sharing out according to traditional custom...
- Neo-colonialism
- Network economyNetwork EconomyThe network economy is the emerging economic order within the information society. The name stems from a key attribute - products and services are created and value is added through social networks operating on large or global scales...
- Nordic modelNordic modelThe Nordic model refers to the economic and social models of the Nordic countries . This particular adaptation of the mixed market economy is characterised by "universalist" welfare states , which are aimed specifically at enhancing individual autonomy, ensuring the universal provision of basic human...
- Non-property systemNon-property SystemA Non-property system is the name of an economic system appearing in the futuristic fictional books and short stories by Iain Banks called the Culture series, in which there is no concept of property. No individual or group is given superior rights to control any particular resource...
- Parecon
- Participatory economy
- Planned economyPlanned economyA planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
- PROUTist economyPROUTProgressive Utilization Theory or PROUT is a socio-economic theory first mentioned in 1959 and fully outlined in 1962 by Indian philosopher and spiritual leader Prabhat Ranjan Sarkar . PROUT is a social system that claims to overcome the limitations of both capitalism and communism...
- Self-management
- Social CreditSocial CreditSocial Credit is an economic philosophy developed by C. H. Douglas , a British engineer, who wrote a book by that name in 1924. Social Credit is described by Douglas as "the policy of a philosophy"; he called his philosophy "practical Christianity"...
- Social market economySocial market economyThe social market economy is the main economic model used in West Germany after World War II. It is based on the economic philosophy of Ordoliberalism from the Freiburg School...
- SocialismSocialismSocialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
- Socialist market economySocialist market economyThe socialist market economy or socialist market economy with Chinese characteristics is the official term used to refer to the economic system of the People's Republic of China after the reforms of Deng Xiaoping. It is also referred to as socialism with Chinese characteristics...
- SyndicalismSyndicalismSyndicalism is a type of economic system proposed as a replacement for capitalism and an alternative to state socialism, which uses federations of collectivised trade unions or industrial unions...
- Subsistence economySubsistence economyA subsistence economy is an economy which refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. Capital can be generally defined as assets invested with the expectation that their value will increase, usually because there is the...
- Traditional economyTraditional economyTraditional economy is a catching-all term normally used to describe economic systems that pertain in societies with extensive subsistence agriculture. The term may also be used for any economy that falls outside of popular notions of market and command economies...
- Virtual economyVirtual economyA virtual economy is an emergent economy existing in a virtual persistent world, usually exchanging virtual goods in the context of an Internet game...
See also
- EconomyEconomyAn economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
- History of economic thoughtHistory of economic thoughtThe history of economic thought deals with different thinkers and theories in the subject that became political economy and economics from the ancient world to the present day...
- Political economyPolitical economyPolitical economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
- Economic ideologyEconomic ideologyAn economic ideology distinguishes itself from economic theory in being normative rather than just explanatory in its approach. It expresses a perspective on the way an economy should be run and to what end, whereas the aim of economic theories is to create accurate explanatory models...
Holmes System
Further reading
- Richard Bonney (1995), Economic Systems and State Finance, 680 pp.
- David W. Conklin (1991), Comparative Economic Systems, Cambridge University Press, 427 pp.
- George Sylvester Counts (1970), Bolshevism, Fascism, and Capitalism: An Account of the Three Economic Systems.
- Robert L. Heilbroner and Peter J. Boettke (2007). "Economic Systems". The New Encyclopædia Britannica, v. 17, pp. 908–15.
- Harold Glenn Moulton, Financial Organization and the Economic System, 515 pp.
- Jacques Jacobus Polak (2003), An International Economic System, 179 pp.
- Frederic L. Pryor (1996), Economic Evolution and Structure: 384 pp.
- Frederic L. Pryor (2005), Economic Systems of Foraging, Agricultural, and Industrial Societies, 332 pp.
- Graeme Donald Snooks, Global Transition: A General Theory, PalgraveMacmillan, 1999, 395 pp.
External links
- Video Overview of Economic Systems by Thinkwell
- Social Studies VSC Glossary
- Glossary-Cultural Anthropology
- ECONOMIC SYSTEMS, a refereed journal for the analysis of market and non-market solution, by Elsevier since 2001.
- Economic Systems by WebEc, 2007.
- World Economic Systems