Types of Economies

Types of Economies

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Yesterday we learned about the basic questions of economics. Our study today will be about how different types of economic systems answer those questions. The types of economies we will examine are

• traditional

• free market

• command

• mixed

Traditional economic systems have these characteristics:

• Economic decisions are based on custom and historical precedent.

• People often do the same type of work as their parents and grandparents regardless of their abilities or potential.

• These societies are small and usually farm-based.

Free market economies (also called capitalism) have the following characteristics:

• private ownership of property and resources

• profit

• competition

• consumer power

• individual choice

Adam Smith was a Scottish 18th-century philosopher who was a founder of free market capitalism.

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Command economies (also called communism) have the following characteristics:

• central (government) ownership of property and resources

• centrally (government) planned economy

• lack of consumer choice

Karl Marx was a 19th-century German philosopher who wrote about the way a command economy would operate.

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Mixed economies have the following characteristics:

• Individuals and businesses make decisions for the private sector.

• Government makes decisions for the public sector.

• Government has a larger role than in the free market economy and a lesser role than in the command economy.

Most modern-day economies are mixed economies, including ours here in the US.