what are the different economic system models?

Question

explain there characteristics

Answer 1

The basic and general economic systems are:

* Market economy (the basis for several "right-wing" systems, such as capitalism).
* Mixed economy (arguably the "centrist" economic system).
* Planned economy (the basis for several "left-wing" systems, such as socialism).
* Traditional economy (a generic term for the oldest and traditional economic systems)
* Participatory economics (a recent proposal for a new economic system)

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MARKET ECONOMY

A market economy (also called a free market economy, free enterprise economy) is an economic system in which the production and distribution of goods and services takes place through the mechanism of free markets guided by a free price system rather than by the state in a planned economy. In a market economy businesses and consumers decide what they will produce and purchase, as a opposed to a planned economy where the government decides what is to be produced and in what quantities.

A market economy has no central coordinator guiding its operation, yet theoretically self-organization emerges amidst the complex interplay of supply and demand and price regarding a multitude of goods and services. Supporters of a market economy generally hold that individuals pursuing their self-interest through trade has the incidental effect of bringing about a spontaneous order that is effective in supplying the greatest abundance of goods for society and in the most efficient manner. Adam Smith says that the individual who:

"intends only his own gain is led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest [an individual] frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the [common] good." (Wealth of Nations)

The economists' model of a free market is one in which there is no governmental intervention or other coercion. The theoretical model of a large-scale free market economy does not occur legally, however the underground economy may be seen as an actualized free market economy.

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MIXED ECONOMY

A mixed economy is an economy that has a mix of economic systems. It is usually defined as an economy that contains both private-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and command economy.

There is not one single definition for a mixed economy, but relevant aspects include; a degree of private economic freedom (including privately owned industry) intermingled with centralized economic planning (which may include intervention for environmentalism and social welfare, or state ownership of some of means of production).

For some states, there is not a consensus on whether they are capitalist, socialist, or mixed economies. Economies in states ranging from the United States to Cuba have been termed mixed economies.

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PLANNED ECONOMY

A planned economy is an economic system in which a single agency makes all decisions about the production and allocation of goods and services. The term is used most often to refer to a centrally-planned economy (or command economy), in which the state or government controls the factors of production and makes all decisions about their use and about the distribution of income. In a centrally-planned economy, the planners decide what should be produced and direct enterprises to produce those goods. A planned economy is usually contrasted with a market economy, where production, distribution, and pricing decisions are made by the private owners of the factors of production and influenced by market forces. A planned economy may either consist of state owned enterprises, private enterprises who are directed by the state, or a combination of both. Though planned economies are usually defined in contrast to market economies, it is not necessary for an economy to be either market-based or centrally-planned; other systems also exist.

Important planned economies that existed in the past include the Economy of the Soviet Union, which was for a time the world's second-largest economy. Beginning in the 1980s and 1990s, many governments presiding over planned economies began deregulating and moving toward market based economies by introducing market forces to determine pricing, distribution, and production. Although most economies today are market economies or mixed economies, planned economies exist in some countries such as Cuba and North Korea.

While the term planned economy usually refers to centrally-planned economies, it may also be used to refer to decentralized systems of planning such as participatory economics.

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TRADITIONAL ECONOMY

A traditional economy is an economic system where the resources are allocated through inheritance, based on primitive methods and tools, which have strong social support. It is strongly connected to subsistence farming. In the majority of countries traditional economy has been replaced by command economy, market economy or mixed economy. However, it is found today in underdeveloped, agricultural parts of South America, Asia and Africa.

Traditional economy fosters the sense of community, as it causes little friction among members and provides a sense of security and psychological comfort. Subsequently, there is no unemployment and low crime rates; no pathological families. Traditional economy allows for a greater degree of autonomy as no money or little is given to the government and there is no competition. It is also environmentally friendly, as the use of technology is limited.

Traditional economy does not allow for economic growth and development as changes are very slow and there is a lack of social mobility. Traditional economy does not take advantage of technology and there is no promotion of intellectual and scientific development. With no incentives for entrepreneurs the consumer choice is diminished. This leads to a lower standard of living and usually causes dependence on nature, 'survival of the fittest' as there is no social security.

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PARTICIPITORY ECONOMICS

Participatory economics, often abbreviated parecon, is a proposed economic system that uses participatory decision making as an economic mechanism to guide the allocation of resources and consumption in a given society. Proposed as an alternative to contemporary capitalist market economies and also an alternative to centrally planned socialism or coordinatorism, it is described as "an anarchistic economic vision". It emerged from the work of activist and political theorist Michael Albert and that of radical economist Robin Hahnel, beginning in the 1980s and 1990s.

The underlying values that parecon seeks to implement are equity, solidarity, diversity, and self-management. It proposes to attain these ends mainly through the following principles and institutions:

* workers' and consumers' councils utilizing self-managerial methods for decision making,
* balanced job complexes,
* remuneration according to effort and sacrifice, and
* participatory planning.

Albert and Hahnel stress that parecon is only meant to address an alternative economic theory and that it must be accompanied by equally important alternative visions in the fields of politics, culture and kinship. Stephen R. Shalom has begun work on a participatory political vision he calls "parpolity". Elements of anarchism in the field of politics, polyculturalism in the field of culture, and feminism in the field of family and gender relations are also discussed by the authors as being possible foundations for future alternative visions in these other spheres of society.