Foundations of Government Part 8: Economic Types and Systems

Economy: the management of resources of a community, or country especially in the views of productivity and prosperity.

Types of Economies There are THREE major types: – Capitalism – Socialism – Communism

Capitalism The main motive for economic participation is profit. – Businesses are privately owned and operated. – Only select individuals benefit. Government’s role is very limited.

Socialism Political and economic system. – Government owns and operates businesses for the good of the people. Abolishes profit motive and competition as goods are produced directly for consumption.

Communism Stateless, classless, society. Common ownership and production. – Everyone contributes to society – Everyone receives a fair share of the benefits

Economic Systems There are FOUR systems that have emerged: – Traditional – Market – Command – Mixed

Traditional System Relies on tradition or customs to make decisions. Little room for innovation. Lack modern conveniences, leading to a low standard of living. Often occurs in small communities

Market Economies Decisions are made by individuals based on trade and/or exchange. – Decisions are dependent on the outcome of production rather than built in to the production plan.

Command Economy Governments make economic decisions in order to improve productivity through consolidation of resources.

Mixed Economies A market economy that allows for limited government interference and decision-making abilities

Examples The United States – Mixed capitalist economy USSR (note that this is NOT modern-day Russia) – Command Socialist economy No modern (1775 on) country has ever been truly communist.

Review What are the three types of economies? – Explain each. List them in order of least government involvement to most government involvement. Name the economic systems. – Explain each.

Foundations of Government Part 9 Government and the Economy

Review What is government What are the types of government? What are the types of economies? Which type of economy has the most government interference? The least?

Government Participation In the US, the government has a few economic jobs: – Enforce Constitutional protections – Taxes – Federal Spending – Protect consumers Information – Provide public goods/services Because they would be impractical for others to do

Government Participation While not all governments choose the economy of their society, the government usually supports it. – Example: In the US’s free market capitalist society, the government tries to stay uninvolved in the actual business side of the economy, interfering only when society pressures them to do so.