Traditional, Command, Market, and Mixed © 2011 Clairmont Press

Economic Questions Different countries answer these questions in different ways: What to produce? How to produce it? For whom to produce it?

Economic Systems: Traditional Command Market Mixed* * “mixed” is NOT one of the three economic systems! It describes an economy on the continuum between “command” and “market.”

Traditional The traditional economy is based on cultural traditions to produce goods and services. An example of a traditional economy can be found in the Yanamamo of Brazil. In their tribe, men, women, and children follow a strict set of guidelines to raise food, produce clothing, hunt or gather. The traditional economy is not a part of the economic continuum.

The Economic Continuum Countries’ economic systems exist on an economic continuum between “command” and “market.” These are “mixed” economies. Currently, there is no pure market economy because every economy has government regulations in some manner. There is no purely command economy in which every economic action would be controlled by the government. The economic continuum is shown below. You will need to be able to draw and label it. CommandMarket MIXED

The Economic Continuum Most of the world’s countries are mixed economies. Understand that the mixed economies slide back and forth with every government action or creation of a private company. (Government = Command) (Private = Market) (Government + Private = Mixed) CommandMarket MIXED

Command (Government Control) The command economy utilizes centralized government control, economic planning groups, and government run production to set quotas. The government controls all means of production, owns farms, and there is very little private ownership. The command economy is an “ideal” that contradicts free market. However, in the world there are some countries that consider themselves a command economy. In truth, they are really a mixed economy that exists on the left side of the economic continuum away from free markets. (see page 67 of CRCT Prep Book for further reading.)

Market (Private Ownership) There is no pure free market in existence today. The Free Market is an “ideal” that contradicts complete government control. The idea of a free market drives entrepreneurship and creativity. However, in the world there are some countries that consider themselves a market economy. In truth, they are really a mixed economy that exists on the right side of the economic continuum away from government controlled command economies. (see page 68 of the CRCT Prep Book for further reading)

Mixed Because there are no true market economies and no true command economies, countries lie somewhere in between. You will need to understand how mixed economies vary with the creation of private businesses and with government regulations.

Mixed (cont.) Example Scenarios: If a country has more government regulation and allows very little private ownership of businesses, it would be on the left side of the economic continuum. If a country has more private companies and has fewer laws, regulations, or restrictions it is located on the right side of the continuum. With every economic policy or action the government takes the economy shifts left on the continuum. With every creation of a private business, product, or exchange the economy shifts right on the continuum.