FBLA Economic Systems

Traditional Economy

Decisions about production and distribution are based on customs, history, and long-standing beliefs

Command Economy

The govt controls all economic activity, making decisions about what to produce, how much to produce, and at what price

Market Economy

Economic decisions are made by individuals and businesses based on the forces of supply and demand, with minimal govt interference

Mixed Economy 

A hybrid system that combines elements of both market and command economies. IT allows for private ownership and free markets while also including govt regulation, social programs, and public services 

What is Capitalism?

Businesses are privately owned with minimal govt ownership or interference

Who controls Capitalist markets?

Complete freedom of trade; no or little govt control

Work incentives of Capitalism

Strong incentive to work and innovate because profits are retained by owners

Management of Capitalist Enterprises

Each enterprise is managed by owners or professional managers with little govt intervention.

Examples of Capitalist Countries 

US, Japan, Chile

The 4 main types of economic systems are:

Traditional, command, market, and mixed

What is communism?

Govt owns all or most enterprises

Control of markets in communism

Complete govt control of markets

Work incentives in communism

No incentive to work hard or produce quality products

Management of Enterprise in communism

Centralized management by the govt bureaucracy; little or no flexibility in decision making at the factory level

Examples of communist countries

North Korea, China, Vietnam, Laos

What is socialism

Basic industries such as railroads and utilities are owned by the govt; very high taxation as govt redistributes income from successful private businesses to entrepreneurs.

Control of Markets in socialism

Some markets are controlled, and some are free; significant central govt planning; state enterprises are managed by bureaucrats; these enterprises are rarely profitable

Worker incentives in socialism

Private sector incentives are the same as capitalism, and public sector incentives are the same as in a planned economy (AKA command economy)

Management of enterprises in Socialism

Significant govt planning and regulation; bureaucrats run govt enterprises

Control of markets in a mixed economy 

some markets, such as nuclear energy and the post office, are controlled or highly regulated

Socialist countries

Finland, India, Israel

Work incentives in mixed economies

Private sector incentives are the same as capitalism; limited incentives in the public sector

Management of enterprise in mixed economies

private sector management similar to capitalism; public sector similar to socialism

Mixed economy countries

UK, France, Sweden, Canada

Laissez-faire

type of economic system in which transactions between private individuals are free from any form of economic interventionism

Feudalism

economic system where land was the primary source of wealth, granting large estates in exchange for military service and loyalty

Mercantilism

eocnomic system (16th-18th century) focused on a nation accumulating wealth, primarily gold and silver, by maintaining favorable balance of trade

Market capitalism

private individuals and companies owns the means of production, and the market, driven by supply and demand, determines prices and the allocation of resources withh minmal govt intervention

Keynesian Economies

Theory advocating for govt intervention through fiscal and monetary policies to manage economic downturns by boosting aggregate demand

Stagflation

Economic conditions characterized by high inflation, stagnant economic growth, and high unemployment all happening at the same time

Market socialism

economic system that combines social ownership of the means of production with a market economy. Instead of relying on govt planning, it uses market forces like supply and demand to allocate sources and guide production

State capitalism

Economic system where the state, not private individuals, controls or heavily influenced the means of production to generate profits for further economic activity and for political goals

planned socialism

economic system where the state or a collective body owns the means of production and the govt makes central decisions about production, distribution, and prices, rather than relying on market forces.

Path dependency

concept where historical choices and events constrain or channel future development, making it difficult to change course

Negative externalities

Costs imposed on third parties whoa re not involved in an economic transaction

Ecological footprint

Measure of human demand on Earth’s ecosystems, quantifying the biologically productive land and water area needed to produce the resources consumed and absorbed the waste generated

Green growth

concept of fostering economic growth while minimizing environmental damage, aiming to make development environmentally sustainable

steady-state economy

an economic model that focuses on stability rather than perpetual growth, maintaining a constant population and level of physical wealth

Degrowth

an economic theory and movement that advocates for shrinking the economy to reduce consumption and prioritize human and ecological well being over endless growth

Central question that distinguishes capitalism from socialism

Who should own the means of production?

Means of production

the inputs used in production

private ownership

occurs when somebody has a legal right to possess something as private property; owner has control over the income generated from that as well as the right to prevent others from using it or to charge people to access it

Social ownership 

means of production may be owned and managed by public institutions, by workers, or through other cooperative or collective ownership arrangements

State ownership

means of production belongs to the state

The 3 main types economic systems can be further classified based on the dominant ownership type, which are:

Market Capitalism, Market Socialism, Mixed Economies, State Capitalism, and Planned Socialism

Key Characteristics of Capitalism

• Dominance of private ownership in means of production

• Emphasis on capital accumulation

• Predominance of wage labor

• Emphasis on decentralized decision-making; big on self interest

• Individuality and freedom

• Markets are the primary means of economic coordination

Negative effects of capitalism

• Competition to reduce costs leads to the exploitation of workers and bad working conditions

• lowering environmental standards

• spending excessively

Capitalism summarized

A capitalist system focused on profit-making often neglects these negative externalities. As decision-making is decentralized, there is nothing that requires individuals to consider how their decisions might affect social outcomes. Hence, high inequality and environmental degradation is often a characteristic of capitalist societies.

Key features of Socialism

• Means of production is owned publicly

• High levels of central decision-making

• A great role of egalitarnian values in guiding social decisions

• Importance on colectivist goals such as equality of opportunity

• Govt has bigger role

Negatie characteristics of Socialism

• Too idealistic, especially hard to implement on a national basis

• Large size and conflicting goals means it requires a lot of planning

• Prevalence of censorship and undemocratic insittutitons

Socialist countries with overwhelming govt control of their society are label as

Communist

Communist vs Socailist

The main difference is the high Utopian nature of communism; private property is entirely abolished, and all property is owned communally