Posted on 2018/12/04

Hello, today we are going to talk about different economic systems.

Models of economic systems differ primarily on two grounds: first, on the form of ownership of the means of production and, secondly, on the way of management and coordination of economic activity. Conditional can be distinguished such basic models of economic systems: the net market, command economy, mixed system, traditional economy.

First let’s discuss market economy.

The concept of "market economy" means the type of economic system, where the main decisions are taken directly by market participants. In view of the foregoing, we see that this type of economy is opposed to the notions of the centralized economy, where such decisions are taken by the state. In a market economy, the role of the state is reduced to the minimum necessary to ensure the functioning of the market itself, in particular by regulating, supervising and correcting some of the market mechanism failures. Thus, and in spite of what is happening in the centralized economy, in the market economy, the ownership of production factors is private, and the regulatory mechanism is the planning and price setting by the market itself, which acts to maximize producer profits and the utility of consumers. Currently, in a modern economy, economic systems tend to combine a market economy with a social state system, which in turn means that, in addition to supervising, regulating and correcting some of the market mechanism failures, the state also plays an important social role in the redistribution of wealth.

Mixed economy.

A mixed economic system is an intermediate between the extremes of a clean market and a team economy. The government plays an active role here, contributes to the stabilization and growth of the economy, providing it with some goods and services that are produced in an insufficient volume or are not at all supplied by the market system, modifying the distribution of revenues, etc. Here there are powerful economic organizations in the form of large corporations and strong trade unions.

It is important to emphasize that private property and reliance on the market system, as well as public ownership and central planning, do not always exist in parallel, at the same time with each other.

For any country there is no unambiguous, or generally accepted, solution to economic problems. Different societies, having different cultural and historical past, different customs and traditions, opposing ideological principles, unequal natural wealth, use various institutes to solve the problems.