Name: M.

Bilal Mirza
Reg # 13621
Economics
Assignment #
Submitted to: Dr.Alam Raza
Date: 9/5/2011
Monday (12:00 to 3:00)

Economic System
An economic system is the structure of production, allocation of economic inputs,
distribution of economic outputs, and consumption of goods and services in an
economy. It is a set of institutions and their social relations. Alternatively, it is the
set of principles by which problems of economics are addressed, such as the
economic problem of scarcity through allocation of finite productive resources.
An economic system is composed of people and institutions, including their
relationships to productive resources, such as through the convention of property.
Examples of contemporary economic systems include capitalist systems, socialist
systems, and mixed economies. "Economic systems" is the economics category
that includes the study of respective systems. Today the world largely operates
under a global economic system based on the capitalist mode of production.
Economic systems can be divided by the way they allocate economic inputs (the
means of production) and how they make decisions regarding the use of inputs.
The two major systems are Capitalism and Socialism.
Basic types of Economic systems
The basic and general economic systems are:
➢ Market economy (the basis for several "hands off" systems, such as pure
capitalism)
➢ Mixed economy (a compromising system that incorporates some aspects of
the market approach as well as some aspects of the planned approach)
➢ Planned economy (the basis for several "hands on" systems, such as state
socialism)
➢ Traditional economy (a generic term for older economic systems)
➢ Participatory economics (a system where the production and distribution of
goods is guided by public participation)
➢ Gift economy (where an exchange is made without any explicit agreement
for immediate or future rewards)
➢ Barter economy (where goods and services are directly exchanged for other
goods or services)
There are several basic and unfinished questions that must be answered in order to
resolve the problems of economics satisfactorily. The scarcity problem, for
example, requires answers to basic questions, such as: what to produce, how to
produce it, and who gets what is produced. An economic system is a way of
answering these basic questions, and different economic systems answer them
differently.
The three systems generally considered the major economic systems in the world
are: Capitalism, Socialism, and communism.
 Capitalism
Capitalism is an economic system in which the means of production are privately owned and
operated for profit. Income in a Capitalist system takes at least two forms, profit on the one hand
and wages on the other. There is also a tradition that treats rent, income from the control of
natural resources, as a third phenomenon distinct from either of those. In any case, profit is what
is received by virtue of control of the tools of production, by the capitalists – those who provide
the capital. Wages are received by those who sell their labor with those tools, i.e. the workers.
Types of capitalism
There are many variants of capitalism in existence. All these forms of capitalism are based on
production for profit, at least a moderate degree of market allocation and capital accumulation.
The dominant forms of capitalism are listed here.
Anarcho-capitalist
Mercantilism
Free-market capitalism
Social market economy
State capitalism
Corporate capitalism
Mixed economy

Characteristics of Capitalism
Private ownership of property and of the means of production is the rule.
Individuals or groups of individuals can invest money in businesses or start
their own businesses (free enterprise).
Owners and investors take risks, but make and keep profits.
The type, quantity and price of goods and services produced are determined in
the marketplace.
Hard work, the desire to compete, and willingness to try new ideas are
important for success.
Government is to avoid interfering in the economy.
Capitalism, as a deliberate economic system, developed
incrementally from the 16th century in Europe, although proto-
capitalist organizations existed in the ancient world, and early
aspects of merchant capitalism flourished during the Late Middle
Ages. Capitalism became dominant in the Western world following
the demise of feudalism. Capitalism gradually spread throughout
Europe, and in the 19th and 20th centuries, it provided the main
means of industrialization throughout much of the world. Today
the capitalist system is the world's most dominant form of
economic

Advantages of Capitalism
• Efficient Allocation of Resources
• Efficient Production
• Dynamic Efficiency
• Financial Incentives

Socialism
Socialism is an economic system in which the means of production are publicly or
commonly owned and controlled co-operatively, or a political philosophy
advocating such a system. A primary goal of socialism is social equality and a
distribution of wealth based on one's contribution to society, and an economic
arrangement that would serve the interests of society as a whole. As a form of
social organization, socialism is based on relatively equal-power relations, self-
management and a reduction or elimination of hierarchical forms of management
in the economic structure of society.

Types of Socialism
Socialism is already part in every county in which people have their chance to
express their feelings and what they have tend to believe for the country. Let us see
her below what are the different types of socialism.
• Anarchism
• Marxian socialism
• Revisionism
 • State socialism
• Syndicalism
• Utopian socialism
• Communism

Characteristics of socialism
Public (government) ownership of the major means of production and
private ownership of the rest exist together.
Individuals or groups of individuals can invest money in certain
businesses or start certain types of businesses.
Government provides for the general welfare of its people.
Government plays an active role in the economy wherever and
whenever necessary to ensure economic strength and social justice.

Advantages of Socialism
• In environments with plentiful resources, socialism provides
all members with their survival needs, creating a stable
social environment.
• Members that cannot participate economically - due to
disabilities, age, or periods of poor health - can still impart
wisdom, emotional support and continuity of experience to
the system.
• Freedom from work provides opportunity for some societal
members to explore non-economically-productive pursuits,
such as pure science, math and non-popular arts.

Mixed Economy
A mixed economy is an economy that includes a variety of private and public
control, reflecting characteristics of both capitalism and socialism. Most mixed
economies can be described as market economies with strong regulatory oversight,
in addition to having a variety of government sponsored aspects.
The economic freedom side includes privately owned industry for reasons
including individual freedom, economic efficiency (most especially the allocate
efficiency provided by the invisible hand of markets), and the incentive to innovate
provided by competition. The government regulation side addresses concerns that
the private sector cannot be (or at least has never yet been) well equipped to
address, such as environmental protection, maintenance of employment standards,
and maintenance of competition. In some mixed economies, it even includes
various degrees of centralized economic planning, that is, state ownership of some
of the means of production for national or social objectives.
Mixed economies as an economic ideal are supported by people of various political
persuasions, typically centre-left and centre-right, such as social democrats or
Christian democrats. Supporters view mixed economies as a compromise between
classic socialism and pure laissez-faire capitalism.
History
The term "mixed economy" arose in the context of political debate in the United
Kingdom in the postwar period, although the set of policies later associated with
the term had been advocated from at least the 1930s.Supporters of the mixed
economy, including R. H. Tawney, Anthony Croslandand Andrew Shonfield were
mostly associated with the British Labor Party, although similar views were
expressed by Conservatives including Harold Macmillan.
Critics of the British mixed economy, including Ludwig von Mises and Friedrich
von Hayek, argued that what is called a mixed economy is a move toward
socialism and increasing the influence of the state.
Advantages of a Mixed Economic System
Free Enterprise

Free enterprise and private ownership--two

essential characteristics of a free-market
economy--remain part of a mixed economic
sys Social Safety Net
One of the primary benefits of a mixed economy is the existence
of a government-funded social safety net, which exists to provide
at least a minimal level of subsistence for citizens. Sometimes
referred to as a "welfare state," the benefits under this safety net
include, but are not limited to, a publicly funded healthcare
system for all citizens or at least some segments of the
population, minimum wage laws, unemployment insurance and a
publicly funded pension system.

Ability to Intervene
The mixed economic system is based on the idea that
government can improve economic outcomes through fiscal or
monetary policy action. A mixed system gives government the
flexibility to intervene in the economy in times of emergency. The
best example of this was in 2008, when a global financial crisis
threatened to plunge the economy into a global depression. The
United States and other nations moved to stabilize their financial
systems. The U.S. government, for its part, provided more than
$700 billion in "bailout" funds to enable the nation's banks to
clear toxic assets, backed by troubled mortgages, from their
books.