An economic system is a system that involves the production, distribution and consumption of goods and services between the entities in a particular society. The economic system is composed of people and institutions, including their relationships to productive resources, such as through the convention of property. In a given economy, it is the systemic means by which problems of economics are addressed, such as the economic problem of scarcity through allocation of finite productive resources. 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.

Overview

An economic system is a set of methods and standards brought by which a society decides and organizes the ownership and allocation of economic resources. At one extreme, production is carried in a private-enterprise system such that all resources are privately owned. It was described by Adam Smith as frequently promoting a social interest, although only a private interest was intended. At the other extreme, following Karl Marx and Vladimir Lenin is what is commonly called a pure-communist system, such that all resources are publicly owned with an intent of minimizing inequalities of wealth among other social objectives.

Alternatively, 'economic system' refers to the organizational arrangements and process through which a society makes its production and consumption decisions. In creating and modifying its economic system, each society chooses among alternative objectives and alternative decision modes. Many objectives may be seen as desirable, like efficiency, growth, liberty, and equality.

Part of a social system

An economic system can be considered a part of the social system and hierarchically equal to the law system, political system, cultural system, etc. There is often a strong correlation between a certain ideologies, political systems and certain economic systems (for example, consider the meanings of the term "communism"). Many economic systems overlap each other in various areas (for example, the term "mixed economy" can be argued to include elements from various systems). There are also various mutually exclusive hierarchical categorizations.

Basic types Economic systems

The basic and general economic systems are:

• Market economy (the basis for several "hands off" systems, such as capitalism).
• Mixed economy (a compromise economic 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 socialism).
• Command Economy (a complete "hands on" system, such as the Soviet economic model).
• Traditional economy (a generic term for the oldest and traditional economic systems)
• Participatory economics (a recent proposal for a new economic system)