Types of Economies
• Remember:
– the type of economy a society
has influences how the
society/government functions,
and vice versa
4 Types of Economies
•
•
•
•
Traditional
Market
Command
Mixed
Traditional Economy
• Found in rural, underdeveloped countries–
– Vanuatu
– Pygmies of Congo
– Eskimos & Indian tribes
– Belarus
• Customs govern the
economic decisions that
are made
• Farming, hunting and
gathering are done the
same way as the generation
before
Traditional Economy Cont’d.
• Economic activities are
centered around the
family or ethnic unit
• Men and women are
given different
economic roles and
tasks
• Advantages: people
have specific roles;
security in the way
things are done
• Disadvantages:
Technology is not used;
difficult to improve
Free Market
• Characterized by:
– private ownership of property/resources
– Desire to make $$ (profit)
– competition
– consumer sovereignty
– no government intervention whatsoever
• Principles of capitalism/free market
were first developed by Adam Smith
• Assume you and a friend (the
person sitting next to you) are
opening a pizza parlor. You
reside in a free market
economy. Take 3 minutes and
figure out how you will make
your pizza in order to make the
most money
Remember, in a true free market economy
there is absolutely no government
intervention.
It is essentially survival of the fittest.
Thus,you can buy/sell any of the following…
Battery Acid Pizza
Dandelion Pizza
Nicotine Pizza
Nicotine acts as a
stimulant in mammals
and is the main factor
responsible for the
dependence-forming
properties of tobacco
smoking. According to
the American Heart
Association, the
"nicotine addiction has
historically been one of
the hardest addictions
to break."
Adam Smith
• Wrote The Wealth of Nations
– Traced the development of
industry and commerce in
Europe
- Smith concluded that a free-market
economy was the most efficient
In it he basically created the study of “economics” as we
know it today. Also provided one of the first convincing
rationales for free trade and capitalism
Command Economy
• characterized by:
–central ownership of
property/resources
–centrally planned economy
–lack of consumer choice.
Karl Marx provided the ideological
foundation for this system - most
commonly known as communism.
In a command economy consumers
have very little, or no choice in what
they can purchase…
Gov’t Inc Pizza
But it’s always
burnt!! I hate
their pizza!
You will buy
Gov’t Inc
Pizza and you
will like it!!!!
Or even their occupation...
I really enjoy
workin' on the good
ol' farm
Not anymore you won't. We need
to industrialize quickly. You must
move to the city and work in the
steel factory!!
Karl Marx
• Founded communism
(With Freiderich Engels)
• Stressed an economy
controlled by the
government
– His goal was to
prevent human
alienation and end
individual greed
Marx continued...
•Wrote The Communist
Manifesto – felt that
capitalism was inherently
evil and that workers
should unite and revolt
against it
–Last line of the book,
“Workers of the world
unite!”
Marx continued...
• Marx broke down society into
two basic classes:
–The proletariat – the working
class
–The bourgeoisie – the owners of
capital (factory owners)
Marx continued…
• The totalitarian and often violent
form of communism that emerged
in the early 20th century was nothing
like what Marx envisioned.
“The death of one person is a tragedy, the death of
a million is a statistic” – Josef Stalin
• The idea of a classless society is a
noble idea, however, it has been
almost impossible to implement
• (His ideas work in theory, but not in
practice)
Communist Countries today:
China, North Korea, Laos, Vietnam, Cuba
Mixed Economy
• Individuals and businesses make decisions
for the private sector
• Government makes some decisions for the
public sector (ex. regulation of monopolies)
• Government's role is greater than in a freemarket economy, but less than in a command
economy
• Most economies in the world today are
mixed economies
In a Mixed Economy the gov’t
regulates what goes into the goods we
purchase in order to protect us
Battery Acid Pizza
Nicotine Pizza
And you can buy your pizza wherever you
want to…
Homework
• Pretend you live in either a Free-Market,
Command, or Mixed Economy and
choose ONE of the following:
– Write a one page “letter home” to a family
member describing the economy OR…
– Draw a detailed, color cartoon depicting what
the economy would “look like”. Please
include a brief description of what you drew