Answer:
Economic system, any of the ways in which humankind has arranged for its material provisioning. One would think that there would be a great variety of such systems, corresponding to the many cultural arrangements that have characterized human society. Surprisingly, that is not the case. Although a wide range of institutions and social customs have been associated with the economic activities of society, only a very small number of basic modes of provisioning can be discovered beneath this variety. Indeed, history has produced but three such kinds of economic systems: those based on the principle of tradition, those centrally planned and organized according to command, and the rather small number, historically speaking, in which the central organizing form is the market.
Economic system
KEY PEOPLE
Mikhail Gorbachev
Solon
Deng Xiaoping
Sergey Yulyevich, Count Witte
Zhao Ziyang
Jiang Zemin
István, Count Széchenyi
Ludwig Erhard
F.A. Hayek
John Kenneth Galbraith
RELATED TOPICS
Socialism
Communism
Feudalism
Manorialism
Daimyo
Capitalism
Neoliberalism
Vassal
Shogunate
Alpwirtschaft
The very paucity of fundamental modes of economic organization calls attention to a central aspect of the problem of economic “systems”—namely, that the objective to which all economic arrangements must be addressed has itself remained unchanged throughout human history. Simply stated, this unvarying objective is the coordination of the individual activities associated with provisioning—activities that range from providing subsistence foods in hunting and gathering societies to administrative or financial tasks in modern industrial systems. What may be called “the economic problem” is the orchestration of these activities into a coherent social whole—coherent in the sense of providing a social order with the goods or services it requires to ensure its own continuance and to fulfill its perceived historic mission.
Social coordination can in turn be analyzed as two distinct tasks. The first of these is the production of the goods and services needed by the social order, a task that requires the mobilization of society’s resources, including its most valuable, human effort. Of nearly equal importance is the second task, the appropriate distribution of the product (see distribution theory). This distribution not only must provide for the continuance of a society’s labour supply (even slaves had to be fed) but also must accord with the prevailing values of different social orders, all of which favour some recipients of income over others—men over women, aristocrats over commoners, property owners over nonowners, or political party members over nonmembers. In standard textbook treatments, the economic problem of production and distribution is summarized by three questions that all economic systems must answer: what goods and services are to be produced, how goods and services are to be produced and distributed, and for whom the goods and services are to be produced and distributed.
All modes of accomplishing these basic tasks of production and distribution rely on social rewards or penalties of one kind or another. Tradition-based societies depend largely on communal expressions of approval or disapproval. Command systems utilize the open or veiled power of physical coercion or punishment, or the bestowal of wealth or prerogatives. The third mode—the market economy—also brings pressures and incentives to bear, but the stimuli of gain and loss are not usually within the control of any one person or group of persons. Instead, the incentives and pressures emerge from the “workings” of the system itself, and, on closer inspection, those workings turn out to be nothing other than thel efforts of individuals to gain financial rewards by supplying the things that others are willing to pay for.
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