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What are the Primary Economic Systems?

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  • Written By: Ken Black
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  • Last Modified Date: 16 November 2016
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The primary types of economic systems are the market economy, planned economy, mixed economy and traditional economy. There are also secondary economic systems that play a role in some situations. However, while an economic system may claim to be part of a new thought pattern, most closely follow one of the primary systems mentioned.

A market economic system is a system that has no centralized planning by the government. Products are bought and sold by individuals who have a direct interest in the transaction, either as a supplier or a consumer. Price is determined by the supply and demand for a certain product and will not normally go beyond some accepted parameters. When it does, it usually comes back into equilibrium. Market economics is often commonly referred to as capitalism.

The opposite of a market economic system is a planned economic system. In this type of economy, the government or some other centralized body, usually closely linked to the government, makes decisions on production and consumption, to a certain extent. Those governing a planned economy may also set prices and manage to the economy down to when goods and services may be produced or offered for sale. Communism and socialism are common types of planned economies.

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A mixed economic system encompasses traits of many different economies, most commonly market and planned economies, to come up with a solution that works for everyone. In most cases, countries employ a mixed economic model. While some may tend to be more market and others more planned, some feel there is some regulation needed, but also some freedom for the suppliers and consumers to have some flexibility as well.

The other type of economic system that may be employed some places in the world is known as a traditional economy. In this economy, the producers are usually also the consumers. Those producers usually make enough for themselves and families. In the event of a surplus, goods and services may be bartered with others. This is a very primitive type of economy and not one in use in any industrialized nation -- at least not on a large scale.

Other types of economic systems include the participatory system, the information system and even the virtual system. While it may be hard to build an entire country or system of buying and selling goods on these types of economies, they can still play an important role. In fact, these types of systems are responsible for producing billions of dollars in economic activity each year.

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titans62
Post 4

@jmc88 - That is pretty interesting. I didn't know something like that existed. When you think about it, though, this Second Life is just kind of a microcosm of the real global economy, since real world money is being spent there.

On a different note, I was reading an article recently about Chile's economic system, and I didn't realize that they were the most successful country in South America, at least according to the way this study was measuring it.

I guess I would have expected Brazil or maybe Argentina to be the most prosperous. I guess bigger doesn't equal more successful, though. What I thought was really interesting is that their human rights and various government services ranked

just as well or better than most highly developed countries.

Considering all those things, the real kicker was that they are successful with each person just averaging making about 2 dollars per day (in US dollars). I thought that was pretty impressive.

jmc88
Post 3

@JimmyT - Actually, virtual economies are really interesting and surprisingly profitable if you are able to produce a good that everyone wants (just like in real life). I don't know what the exact specifications are for a virtual economy, but they obviously have to occur in some alternate reality.

The main example I can think of is the computer reality game called Second Life. If you aren't familiar with it, basically, you create an online representation of yourself, and there is a world that you can build and explore in, just like real life. Plus you can interact with other users. The interesting part, though, is that there is a monetary system in place, so you can take real life

currency and convert it into Second Life currency to spend around the virtual world.

The range of things you can buy is pretty amazing. I know of someone who makes quite a bit of money by designing shirts for the characters to wear and then sells them. Probably the most controversial thing is that people can make certain explicit material which, not surprisingly, sells very well.

It all seems kind of strange to me that people would want to spend real money on all that stuff, but I guess they enjoy it.

JimmyT
Post 2

@jcraig - Actually, the US and most of the successful countries you are alluding to use a mixed economy. Yes, America is typically characterized as a market economy, because the majority of transactions are free, and the market determines what is produced and how much it is sold for. On the other hand, though, the US has a lot of regulations on various things.

Farmers are given subsidies to increase the price that they can sell their crops for, and the government imposes patents on certain intellectual property so that only one person can benefit from it, no matter how high the market demand is. There are numerous other examples, but all of these countries you are thinking of have

quite a bit of regulation. It is necessary for them to function more effectively.

What I am really curious about, though, is whether anyone is familiar with any of the other types of economic systems mentioned at the end. I am especially interested in is the "virtual" system.

jcraig
Post 1

I think, without a doubt, the market economy and capitalism have to be the best system, right? That is what the United States and the other most successful countries use, and it has been a proven success. People are able to prosper and buy whatever they want when they want it. I just don't see how something like socialism could ever work. I would be curious to hear if someone else thinks differently or has any examples that would go against capitalism being the best system.

The thing from the article that I am not familiar with is the traditional economic system. Where does this get used? It says it is not on a large scale, but why? It seems like it would be effective, since everyone would be supplying themselves with most of their basic needs like food.

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