Economic Theories
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Economic Theories
Economic System
An economic system is
a structure of the functioning of an economy. The structure basically shows the
freedom or restrictions imposed on the people living in the country in relation
to use of resources of the country for the purpose of economic growth and
economic objectives of the country. Broadly, there are three types of economic
systems namely, Capitalism, Socialism and Mixed Economy.
Of the present-day economic systems, capitalism is perhaps the oldest. Though it has come under heavy criticism in the recent past, it still retains its existence in one of the most prosperous and powerful countries in the world, USA., besides several other smaller countries. Capitalism basically has the following features:
- Private Ownership of Property
- The right of Inheritance
- Competition
- Profit Motive
- Economic Inequality
- Concentration of Economic Control in the Selected few.
Socialism is an economic organisation of society in which the material means of production are owned by the whole community and operated by organs representative of and responsible to the community according to the general plan, all members of the community being entitled to benefit from the results of such socialized-planned production on the basis of equal rights. Socialism basically has the following features:
- Ownership of means of production by the State as representative of the community.
- General Planning of the economic activity.
- Equitable distribution of national income among the people.
Mixed represents the intermediate system between capitalism and socialism. In several countries of the world, it is this economic system, which has been accepted by people and governments. An important characteristic of mixed economy is the existence of two sectors, viz., the private sector and the public sector.
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