Transcript ECONOMIC SYSTEMS

ECONOMIC SYSTEMS
Around the World
2010 Global Peace Index
Based on 23 indicators: # of police, # of homicides, % of population in jail,
potential for terrorist attacks, military expenses, and amount of weapon
imports, etc. They are ranked on a scale from 1 to 5. 1 meaning a very high
level of peace and 5 being a very low level of peace.
What is an Economic
System?
How ppl or societies satisfy needs &
wants
THROUGH
Incentives, choices, allotment of
resources
Economic Resources
Natural resources
Human resources
Capital resources
Entrepreneurial resources
Scarcity – shortage of
resources
Why Economic Systems?
Determine how to use scarce
resources effectively
1) What to produce?
2) How to produce?
3) For whom to produce?
Four Types of Economic
Systems
Traditional
Command
Market
Mixed
Traditional Economy
Traditional customs/beliefs govern
economic decisions
Farming, hunting, gathering,
bartering
Centered around local, family,
ethnic units
EX: villages in Africa & S. Amer., Inuit tribes
in Canada, Aborigines in Australia
Traditional Economy
Advantages
Ppl have specific
roles
Security in way
things are done
Disadvantages
No technology
Difficult to improve
Command Economy
Gov’t makes decisions on “who, what, for whom”
& determines how resources are used
Gov’t sets prices of goods & services
Must meet set quotas
EX: Cuba, North Korea, former Soviet Union,
China
Command Economy
Advantages
Equal standard of
living for everyone
Less crime?
Needs provided
through gov’t
Disadvantages
Shortages common
No individual
choices
No competition =
no incentive to
improve quality,
prices
Market Economy
Production & distribution are
governed by supply & demand
Most resources owned by private
citizens
Free enterprise (competition between
companies)
Individuals & businesses
make decisions, not gov’t
Market Economy
Advantages
Competition for
better quality, best
prices
Economic freedoms
& choice
Disadvantage
Huge rift between
rich & poor
NO true market
economies exist!!!
Mixed Economy
Combination of command & market
Gov’t & individuals share decisions
Gov’t regulates production of goods,
services offered, protects
consumers/workers
Individuals own resources, means of
production
EX: Western Europe, U.S., Australia
(Russia is moving towards a mixed
economy)
Mixed Economy
Advantages
Balance of needs &
wants
Fair competition?
Disadvantage
Some limits on
individuals
Citizens must pay
taxes
Government Meets Economics
Capitalism – Market or Mixed
Some gov’t involvement (if mixed)
Competition, individual ownership
Socialism – Command or Mixed
Still some capitalism
More gov’t involvement
More equal distribution of wealth
Communism - Command
Collective ownership of means of production and the
services/goods produced
No individual ownership or wealth
What about the Wealth
Gap?
The North/South Divide
Developed
Developing
These countries differ in…
Environment (resources)
Historical development
Government/politics
Economic systems  Trade policies & globalization
Culture influences the above factors
Global Economics
Developed countries affect the developing
countries
What happens in a developing country can
have an effect on developing countries
Economic Nationalism
A country’s economic well-being is related to
its control of global wealth
Politics on labor, production, wealth
accumulation
Coordinated w/social and political systems
GDP  accurate measure of country’s
economic well-being?
These take into account
Economic well-being index
inequalities, security, life
standard of
Human Development Index expectancy,
living, consumption, etc.
Globalization
Increasing interdependence among nations
Economic globalization is the
interdependence among countries due to
Trade
Foreign investments (borrowing $, etc.)
Foreign aid
Has an effect on a country’s social and
political life
The World Bank
International institution that gives
loans to developing countries for
programs
The World Bank invested nearly $53
billion in developing countries last year.
World Trade Organization
WTO – organizes rules of trade
between countries
Part of United Nations – 1995
Freer trade, fair competition, economic
reform
Imports, exports, tariffs, etc.