Economic Systems

A. The Needs for Economic Systems

• An economic system is the method established to fulfill the economic tasks.
• The complexity of economics definitely needs a system to have things moving orderly and working in unity.

B. The Three Economic Systems

• Traditional Economics

1. Based on traditions and beliefs of the people; knowledge is taken from generation to generation.
2. The elders of society control their decisions and such decisions are rooted from the traditions and culture.
3. Commerce comes only in the form of barter trade and simple exchange is common. There are no added factors such as loans and interests.
4. Most products produced are primary in nature.
5. Traditional Economics is a self-sustaining environment. Basic needs are met from the fruits of toil and labor. It can thrive on its own.
6. On the downside, this kind of system is rather static. There’s no progress in the market and society remains stagnant over time. Basic needs are the only things satisfied.
7. The negative conservative nature of traditions and culture often hinder development.
8. Most traditional economies are found in non-industrial countries, agrarian primitive countries.

• Command Economics

1. Someone or a group is at the helm of economic control. Such group contains total authoritarian control over the country and all decisions come from them.
2. They have the power to impose goods to be produced and control their quantity by setting quotas.
3. Everything is owned by the government, like factories, essential public services, and land.
4. There is equal distribution and benefit among the people if the deciding body works for the people and not for personal purposes.
5. There is an order of priorities and a more balanced production.
6. Resources can easily be manipulated depending on the current needs.
7. In times of crises, it is the best method to get society organized and distribute goods properly.
8. Unfortunately, such control hinders personal development and creativity among the populace. Human rights are violated and freedom is curtailed. The selected power group can impose whatever they want over the people without apparent opposition.
9. There is also no such thing as private ownership.

• Laissez-faire Economics

1. It’s a free-for-all system where no definite rules govern the market. The main factors that control the situation are supply and demand. Everything is based on personal interests – from the kinds of goods to be produced to the target beneficiaries of such products.
2. Everything is decided upon by businesses, from the rules of competition, conditions of labor to market control without control from the government. Individuals privately own all resources.
3. Laissez-fair preserves freedom in all aspects. Everyone can act as they see it fit in the picture.
4. Individualism is upheld; innovation and creativity is encouraged because of strong competition. "Only the fittest will survive."
5. Everything is centralized on money and profit.
6. For third-world countries though, Laissez-faire has a side effect in society. There is an uneven distribution of wealth among the people, and most businesses tend to cater only to the rich classes in search of bigger profits. Those who dwell along the poverty line, get less or no service at all.
7. For third-world countries though, Laissez-faire has a side effect in society. There is an uneven distribution of wealth among the people, and most businesses tend to cater only to the rich classes in search of bigger profits. Those who dwell along the poverty line, get less or no service at all.
8. With profit only in mind, the poor are forgotten and very few of them receive opportunities for a better living.
9. The real needs are often ignored by the system for created and luxurious needs. Its nature becomes more of a "want" than a "need."

C. The Mixed Economy

• In present society, there is no single method used. Everything is a combination of all three systems. These systems result in a fourth type of economy called the Mixed Economy.
• In a Mixed Economy, all systems are present, but one is the dominant system over the rest. There will always be features of other economic systems despite the apparent influence of the dominant system.
• There is no perfect system to address the problem of economics. The ideal system though, primarily must suit the concrete circumstances of the people. It is the kind of system, which primarily based on the needs and aspirations of the people and upholds freedom and the protection of rights inherent to man.

Further Reading

• Economics lesson plans were based and adopted from Fr. Roberto Yap's economics notes found in the Tulong Dunong Sourcebook and Michael P. Todaro: Economics for a Developing World