Economic Systems

Economic Systems

1. Importance of an Economic System

   • Growth of the country
   • Providing goods and services

2. Mixed - A mix of Market, Traditional, and Command systems. Benefits from all of the advantages while suffering few of the disadvantages

   • Cons
     • Tends to depend on which characteristics of the mixed economies are utilized
     • Central planning of government industries can result in things like the defense industry becoming a government-subsidized monopoly, resulting in the country going into debt and slowing the economic growth.
   • Pros
     • Ensures less competitive members receive care
     • Allows for a large government to mobilize to areas such as defense, technology, and aerospace
     • All of the advantages of a market, distributing goods and services where they are most needed, rewards most efficient producers, encourages innovation, and automatically allocates capital to the most innovative and efficient producers
   • Examples: United States, United Kingdom

3. Command - Where the Central Government makes all economic decisions, while they or a collective owns the land and means of production

   • Examples: North Korea, Cuba, Former USSR, and previously Communist China
   • Pros
     • Can Quickly mobilize economic resources on a large scale
     • Capable of executing massive projects, create industrial power, and meet social goals
     • Not slowed down by lawsuits or environmental impact statments
     • Wholly transform societies to conform to a governments vision
       • Workers placed in jobs based on governments assessment of skills
       • Administration nationalizes private companies
   • Cons:
     • Rapid mobilization mow down other societal needs, telling workers what jobs they must fulfill, not allowing them to move, and goods produced to not reflect public demand.
     • Often develop a shadow economy or black market, as people attempt to fill demands that the government will not allow
     • Production is disproportionate, creating too much of one thing and not enough of another
     • Prices set by central plan and do not measure supply and demand, rationing becomes necessary often.
     • Discourages Innovation as businesses are rewarded for following directives, which doesn't allow for taking risks needed to create new solutions to problems.

4. Market: The system in which the laws of supply and demand direct the production of goods and services.

   • Examples: Hong Kong, Singapore, Australia, and New Zealand
   • Pros:
     • Goods and services are produced in the most efficient way possible.
     • Successful businesses will invest in other successful businesses, providing them an advantage and leading to increased quality of production
     • This system ensures that the most desired goods and services are produced
     • Rewards innovation, creative new products meet needs better than existing goods and services. This pushes competition to continue developing technologies to stay competitive.
   • Cons
     • Those who are caretakers of those that are disadvantaged are themselves disadvantaged as their energies are directed at caretaking and not competition
     • Has no inherent system to care for those at an inherent competitive advantage including elderly, kids, and those with mental or physical disabilities
     • Human resource element of the Society not always properly utilized; for example a child who has the intelligence, capability, and skill to be an Aerospace Engineer is working low income jobs instead of pursuing their talents, to help support their low-income family
     • Supports the winners of the market competition. Results in many cases where the economy is producing to the demands of the wealthy and successful while others starve and are homeless.

5. Traditional - Culture defines the Traditional Economic system and it is built around the livelihood of the people to determine the products and services offered.

   • Cons
     • Extremely vulnerable to changes especially the weather
     • Population growth limited
     • If harvest or hunting is poor, people starve
   • Examples: Rural portions of South and Latin America, the Middle East, Africa, and Asia.
   • Pros
     • Minimal Friction between people
     • Custom dictates the distribution of resources
     • Everyone understands their contributions toward production and what they are likely to receive, leading to less unrest
     • Small economies, but are much less destructive to their environment than developed economies
     • Lacking the capability of producing more than they need, provides more sustainability.

6. US Economy - The US Economy is a mixed economy. It started out as a traditional economy and became a true Market Economy. In modern times it has evolved into the mixed market economy we have today. Taking many portions of the market economy, the US economy has legislation from the government that protects those that are less competitive and also has the government put money and resources into things like defense. This approach mixes good bits of command economies into it while still allowing the freedom of a market system