The Role of Economic Systems Governments provide for many different kinds of economic systems Economic systems make decisions about what goods and services should be produced, how they should be produced, and who gets them

Discussion Question: Why is some government involvement necessary for economic systems to function?

Properties of Communism Properties of Capitalism Social/cultural rules and political laws define the environment. Supply and demand provide environmental pressures. Those that best "fit" that environment survive and maintain the rules/laws. All members share both work and benefits. Those that do not provide their share of effort and resources to the system are culled. Successful communistic systems tend to be small and homogeneous. A healthy communistic system results in a cooperative society.

Discussion Question: What are some of the advantages/disadvantages of communism? What are some of the advantages/disadvantages of capitalism?

Disadvantages of Communism Large or geographically broad populations tend to be diverse, making it difficult to maintain a common goal or set of rules for shared effort and resources. Large, diversified societies tend to gravitate towards systems of hierarchy, reducing the perception of fair distribution of work and resources - which can destabilize a communistic society. As such, communistic systems tend to block out external cultures and exclude outside competition, weakening the system's ability to learn from, or compete with, external economies.

Advantages of Capitalism Capitalism is an internally stable economic system, in that it is consistent with human behavior. People understand that life is not fair - there's no "free lunch". You have to work to survive, and only the lucky who manage to thrive within the socio-economic matrix make it to the top. As long as there is a belief/hope that one can advance in the system, there is an incentive to participate.

Advantages of Capitalism Capitalism is also externally stable, in that survival in a capitalistic system requires innovation and flexibilty to keep up with the changes in supply and demand. Such a system is generally prepared to deal with the influx of competition from external sources. Large populations are likely to be diverse, which is beneficial to healthy capitalistic systems. Large, diversified societies tend to gravitate towards heirarchical social systems; capitalism easily adapts to such structures.

Disadvantages of Capitalism It is not acceptable in most modern societies to allow portions of their population to be "culled". Those in power tend to construct rules that limit diversity and competition, thereby weakening the flexibility and strength of the system as a whole. Vast imbalances in opportunity encourages revolt, which disrupts and destablizes the system.