1. Economic Systems

2. Market Economy Market Progress: is it stressed? Highly stressed!
How is choice of jobs determined?
Individual preference
What motivates workers to produce?
High self-gain
How to produce?
Least cost method
Who/what determines how products will be produced?
Whatever is most profitable
For whom are products produced?
Highest bidder (whoever will pay)
What are the basic values of this system?
Competition, material rewards, self-gain, freedom

3. Command Economy Command Progress: is it stressed? To some degree
How is choice of jobs determined?
Government directed
What motivates workers to produce?
Limited social gain
How to produce?
Least cost method
Who/what determines how products will be produced?
Whatever the government decides is needed
For whom are products produced?
Those declared in need
What are the basic values of this system?
Cooperation, ‘moral’ rewards, societal gain, government decree

4. Traditional Economy Traditional Progress: is it stressed? Not at all
How is choice of jobs determined?
Custom-directed
What motivates workers to produce?
Traditional incentives
How to produce?
Traditional ways
Who/what determines how products will be produced?
Whatever was traditionally produced
For whom are products produced?
Distributed by custom
What are the basic values of this system?
Custom, traditional ways and beliefs

5. Some additional words…
Mixed Economy:
Combining economic principles
Individuals make free economic choices with some government intervention
Pure command/ pure market economies are rare
(In US: government keeps competition free/ fair, protects public interest)

6. Some additional words on capitalism (market economy)
Key ideas: consumer sovereignty; private property; profit motive; competition
History of Capitalism
Adam Smith: The Wealth of Nations
Laissez-faire economics: government should not interfere in marketplace
“Invisible hand” will keep economy running

7. Some additional words on command economies
Socialism
Government owns industry
Goal = economic equality
Aims for classless society
Communism
Karl Marx, The Communist Manifesto
Society divided into two classes: capitalists who own industry; proletariat who produce goods
Class struggle will lead to revolution- workers revolt, overthrow capitalists
Communism: classless society; all property in common; no need for government

8. On 79L, write the question and then answer….
In each system, who answers the basic economic questions?
Which system is best? Explain your answer.

9. On 79L….
Use the descriptions of the economic systems that I will hand out to you
Come up with 2 advantages and 2 disadvantages of each of the 4 systems
Be able to justify!