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