Some countries believe that other types of economic systems would help their government manage their country. The economic systems have their own benefits and weaknesses, which are discussed in detail below.
The Traditional Economic System:
The traditional economic system is one of the oldest economic systems, usually in third-world countries. The system provides total satisfaction on the social level in such an economic system. However, the system is usually behind in technology and advancement. The main concerns in such an economy are agriculture and fulfilling their physiological needs.
The Command Economy:
In a command economy, the decisions are made by a single authority. The command economy believes in equality and it has been promoted in the theories of communism. The government plays the role of the main decision-making authority. This includes planning and the distribution of resources. The government ensures that all the parties receive an equal amount of resources whenever necessary and ensures the continuous supply of them. Theories believe that the command economies are powerful enough to create enough jobs in order to drop down the inflationary rate of the economy. However, the main focus of the command economies in practical life is oil. The government owns all the resources in this economy.
The advantages of such an economy include the creation of jobs if this economic scenario is applied correctly. Moreover, the government can focus on maintaining the lives of the public instead of an individual. However, the disadvantages include the lack of innovation as the individuals don’t feel the need to take risks or put more effort into their job. It also makes the job hard for the government while rationing the supplies as the demand is difficult to realize.
The Market Economic System:
This is known as a disliked economic system. It is called the free-market economy or the laissez-faire economy. A market economy is the opposite of a command economy. In such an economy, the government doesn’t interfere in the market. The market prices are decided by the interaction of supply and demand where bargaining prevails. The households and the firms decide the supply of goods. Nowhere in the world does a true free-market economy exists.
The benefits of this economy are numerous. All the companies compete to gain more profit, giving rise to innovation in the market. Companies invest heavily in the Research & Development department. New businesses get introduced, and people work hard to achieve a luxurious life. The biggest disadvantage of such an economy is the existence of a monopoly. Moreover, the market stops including the elderly and disadvantaged people to increase the productivity of the company. Hence the income inequality exists greatly in such an economy. Moreover, the companies don’t consider human health and needs while introducing their products as the government is not involved.
The Mixed Economy:
This is the ideal form of economy and exists worldwide. All the countries are incorporating such type of economy one way or another. It promotes the free market economy but with a minor interference of the government. The government does not own the resources, but to protect the sovereignty of the consumers, it introduces laws and rules. The government also protects both the buyer and the seller by setting up the ceiling and the floor prices of the products. It promotes a healthy environment where the companies are conditioned to develop a CSR department and help the community while maintaining the acceleration into the development of innovative ideas. Such an economy operates at the peak and provides society with a huge benefit.
