The Four Economic Systems

1. Introduction

The process of distribution of resources, trade goods and services performed by countries and governments are referred to as Economic Systems (Umar Farooq 2009)

The economy plays a significant role worldwide as it relates to the balancing of political power, fighting for control, and determining the quality of life of the people affected. It is therefore vital to have an understanding of how the various economies work, and the way an economy works is dependent on the type of economic system it uses.

Four primary economic systems have been identified in the world, each with its very unique qualities. The four types are: traditional, market, command and mixed economic systems.

The purpose of this report is to discuss and shed

The individual has no control over decisions about resources. Prices and even pay; are determined by the government. Most of the socialist countries fall into this category, although some exert varying controls over their industries, from targeted control of only the major industries and full control over the economy in others. The disadvantages of this system is that producers might not really know what the consumers want because all proceed go to the state, and people might not be motivated to be efficient in their work which might lead to production of low quality goods and services. Additionally, the system discourages entrepreneurship as the state exercise monopoly over the economy. The major benefit is the equal distribution of goods and services among the people including the rig and the poor, which promotes

The question however, is how much government control and regulation is necessary to constitute a balance.

1.5 Conclusion

Although the four types of economic systems have been used by various countries in the past and are still being practiced by many countries today, it is clear that some offer more benefits for development better than others. No matter how rich or poor a country is, it needs to answer the three basic economic questions of what needs to be produced and how to produce it, and for whom should it be made. The relative importance of a particular system in a country is simply the determinant of the type of economic system that it is normally considered to be.

History shows that the command economies such as the Soviet Union were not as robust as the mixed economies of the world which might explain the failure of the Soviet Union since economic power translates to political power as