Matakuliah : J0594-Teori Ekonomi
Tahun : 2009

• Economic System Defined
– Ownership of Factors of Production
– Method Used to Motivate, Coordinate, and
Direct Economic Activity
• Command System
– Socialism or Communism
• Market System
– Capitalism
– Pure Capitalism – Laissez-Faire
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• The Command System
The command system is also known as socialism or communism .
In that system, government owns most property resources and economic decisions making occurs throught a central economic plan
• The Market System
The polar alternative to the command system is the market system , or capitalism . The system is characterized by the private ownership of resources and the use markets and price to coordinate and direct economic activity
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• Private proverty
• Freedom of enterprise and choice
• Seft-Interest
• Competition
• Market and Prices
• Technology and Capital Goods
• Specialization
• Use Money
• Active, but Limited Government
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The key features of the market system heps explain how market economic respon to pive fundamental questions :
1. How will the goods and services be produced ?
2. Who will get the goods and services ?
3. How will the system accommodate change ?
4. What goods and services will be produced ?
5. How will the system promote progress?
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Demise of Command Systems
• Two Insurmountable Problems
– The Coordination Problem
– The Incentive Problem
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In his 1776 book The Wealth of Nations , Adam Smith first note that the operations of a market system creates a curious unity beetween private interst and social interest
– Efficiency
– Incentives
– Freedom
Firms and resource supplier, seeking to further their own self-interest and operating within the framework of a highly competitive market system, will simultaneously, as though guided by “ invisible hand ”, promote the public or social interest
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