Types of Economic Systems

Different Types Of Economic Systems

Types of economic systems are based upon per ca pita income, prioritization of individuals to spend their resources and scarcity of both income and resources. The best possible solution to these three potential problems is the basis of a successful economic system. Precedence set by society, its individuals and the government for the attainment of resource mobility and individual freedom is fundamental to the right choice of system for any society.

The first main type of system is planned economy or popularly known as hands on type of system. Examples will include communism, liberal socialism, market socialism, feudalism and state socialism. As the names indicate, it is basically a reserved type of system in which, state exercises its power over resources, individuals as well as cumulative output. From prices to wages and from houses to occupation selection, government is at the helm of affairs. While some of systems included in this category allow the government to assume control of only major industries, others however allow governments to make decisions of every nature. But the role of government is very imposing in this type of system.

The monopoly of individual entrepreneurs is not a very important role player in this system, which results in drastic cuts down of the competition environment. On the other hand people might get basic commodities easily as compared to other systems but running of such a system efficiently remains a daunting task. Market economy or as they popularly call it hands off system is based on the individual investors choice and their decisions. Capitalism, anarcho capitalism, mutualism and non property system are some of the many examples of this system. The role of government is confined till making laws and their implementation, security and provision of basic necessities. Government is not interfering with the financial affairs of state. It is not the state responsibility to provide people with a shelter and food. People are themselves responsible for their decisions and the compound effects of these decisions.

The third type of system boasts of the best qualities of both market system as well as command system. It is therefore, named as mixed economic system. Both governments and individual investors are playing their part in the financial progress of society. The state makes policies which are guidelines to move forward in economic arena while the individuals are investing their capitals to achieve the goals of personal as well as monetary prosperity for the society.

Government is playing its role in allocation and effective distribution of resources. Common man is being employed to use these resources and produce the output which is a source of livelihood for investor, worker and a source of income for the government. Almost all modern countries are employing this strategy keeping in mind their own limitations.With nearly half of twentieth century seeing the battle of different types of economic systems, one can now clearly work out the pros and cons of each system. Each system offers some benefits at the cost of other limitations. Making the right choice will solely be dependent on people and their choice of lifestyles.