They differ according to two main characteristics. Economic Systems They differ according to two main characteristics. Who owns the factors of production - Government/public or private ownership 2. Methods used to coordinated econ activity These answer the 3 basic econ questions (1) what to produce (includes how much) (2) how to produce (3) for whom to produce

Usually private, could be public Traditional Systems Usually private, could be public 2. Customs, beliefs, religion, habit, etc. Examples: Amish, Eskimo, tribal villages

Command Systems Government 2. Government planners decide what will be made, how and for whom (communism) Founder: Marx

Command Systems Founder: Karl Marx

Command Systems Examples: Soviet Union (Lenin), Cuba, N. Korea China was but now has market) Vietnam (was but starting market) Russia (was but now doing a really bad job of starting a market)

Market Systems Private Ownership 2. Interaction of market forces (supply and demand) determines what will be made, how and for whom. What gets produced is “voted” on by people’s money (prices) Founder: Adam Smith Examples: U.S., England, etc. Unless Mixed distinction Vocab: Laissez Faire: “let it be” = keep gov’t out of it, A.K.A Pure Capitalism

Mixed Systems USA: Mostly Market Economy, but with some Gov’t interference 1. US GOV: produces some goods/services National Defense Interstate Highway system

Mixed Systems 1. US GOV: produces some goods/services Public Works Hoover Dam Public Works Golden Gate Bridge Erie Canal

Mixed Systems USA: Mostly Market Economy, but with some Gov’t interference 2. Influences What/How/For Whom only when national need or for minimum standards

Mixed Systems USA: Mostly Market Economy, but with some Gov’t interference 3. US GOV: redistributes income (Y) Expenditures Taxes