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The 4 Primary
Economic Systems
Which goals will be given priority?
• Growth—maximizing
production of goods & services
• Employment—making
sure everyone has a job
• Efficiency—getting the
most production out of the
resources you’ve got
• Stability—No fast or
disruptive changes
(GEES)
1. Traditional
How to produce
• Growth
• Employment
• Efficiency
• Stability
Based on Need
What to produce and for whom?
African Tribes
Amish
Native Americans
2. Command
Government Planning
What to produce and for whom?
How to produce
• Growth
• Employment
• Efficiency
• Stability
Collectivized Agriculture in China
Government Ownership of Industry
Soviet Politburo—made all decisions
Countries that have been
communist at one point in time
3. Capitalist
Supply & Demand/Price
What to produce and for whom?
How to produce
• Growth
• Employment
• Efficiency
• Stability
New York Stock Exchange
Hong Kong Consumerism
Competition
Adam Smith (1723-90)
• Argued: Free markets best
promote the social welfare
Wrote “The Wealth of Nations”
This map shows countries (in white) that
England has never invaded. There are
only 22 of them.
Adam Smith & The Invisible Hand
Law of the Market #1: People follow their own SELF-INTEREST
Therefore: Markets are self-regulating
Government
should not
Interfere!
Law of the Market #2: Competition keeps
them in check
--market runs as if directed
by an invisible hand
4. Mixed/Socialist
Mostly Supply & Demand, Part Gov’t Planning
What to produce and for whom?
How to produce
• Growth
• Employment
• Efficiency
• Stability
French National Transportation system
British National Health
System (NHS) Hospital
Danish University system
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