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, under-

developed 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 PizzaNicotine 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.

You will buy Gov’t Inc

Pizza and you will like it!!!!

But it’s always burnt!!

I hate their pizza!

Gov’t Inc Pizza

In a command economy consumers have very little, or no choice in what they can purchase…

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 free-market economy, but less than in a command economy• Most economies in the world today are mixed economies

Battery Acid Pizza Nicotine Pizza

In a Mixed Economy the gov’t regulates what goes into the goods we purchase in order to protect us

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