Economic Systems Market vs. Command

Economic Systems Two Broad Categories: Market Economy (Capitalist) Command Economy (Planned) NOTE: No country has a pure Market or pure Command Economy….all are mixed. Command Market

Economic Systems How do we determine, or measure, the type of economic system you have? Three Questions are asked: What goods and services are produced? How should these be produced? For Whom should these be produced?

Economic Systems Market Economy

Economic Systems - Market 1st Question What goods should be produced? Consumers decide. Meet their wants and needs. If consumers don’t want it, it won’t be produced.

Economic Systems - Market 2nd Question How should goods be produced? Businesses decide. They will compete with other companies and products. The individual companies must find the most efficient way to produce to be able to succeed.

Economic Systems - Market 3rd Question For Whom should goods be produced? For whomever can afford it. If you do not have money you cannot buy the good. TOO BAD. Nobody is entitled to goods or services. To be able to buy goods, people are motivated to work and earn money.

Economic Systems Command Economy

Economic Systems - Command 1st Question What goods to produce? Government decides. They choose what is important to spend resources on. EX: military vs. furniture. Thus, there may be shortages for goods that aren’t deemed important by Govt.

Economic Systems - Command 2nd Question How should goods be produced? Government decides. Govt owns the means of production. They employ workers and control industry. They set wages and determine schedules. No bargaining or competition.

Economic Systems - Command 3rd Question For Whom should goods be produced? Government decides who gets what and how much. All people share equally in wealth. Every one has basic needs met. Govt provides housing (dictates where to live), provides food (decides what to eat), provides jobs (determines where to work).

Economic Systems (REVIEW) Two Broad Categories: Market Economy (Capitalist) Command Economy (Planned) NOTE: No country has a pure Market or pure Command Economy….all are mixed. Command Market

Economic Systems Mixed Economies

Economic Systems - MIXED All economic systems are Mixed. To what degree? Three Models (philosophies) Capitalist Model Socialist Model Communist Model Command Market Communist Socialist Capitalist

Economic Systems Capitalism

Economic Models – Capitalist Same as Free Enterprise Characterized by private ownership and competition Government stays out of business way Make profit (corporate and individual) Help those who cannot help themselves

Economic Model - Capitalism This model allows for open competition and for making a profit. Profit provides motivation to succeed and competition required efficiency and price control. Because government does not “provide” for people but allow them to purchase and own what they want, individuals are motivated to work to earn money for purchases.

Economic Systems Socialism

Economic Model - Socialist Government reduces difference between rich and poor. (Classless system) Key industries run by government (control prices / provide employment) Provide services for all. “Cradle to Grave” High taxes to provide services

Economic Model - Socialist This model believes there should be one class. Socialist also believe that all people should have services provided for them…health care, schooling, pensions. (Cradle to grave coverage) To do this, those who make money are taxed heavily to “redistribute wealth” and provide all with services. Businesses highly regulated (vacations, hours, etc)

Economic Systems Communism

Economic Model - Communist Government runs everything. All people are assigned jobs / school Housing assigned according to need Medical care is free Government determines products

Economic Model - Communist This system provides no incentive to work and earn money as the government dictates what you make and were you work. Additionally, you are provided for if you do not work. System fails as there is no competition to improve technology or efficiencies. Privatization happens (allowing businesses to be privately owned…not govt owned)

Economic Systems Global Trends

Economic Systems - MIXED All economic systems are Mixed. North Korea Cuba China Russia France Germany Canada Japan United States Hong Kong Communist Socialist Capitalist Command Market