Overview: Which economic system is "better?" The answer depends on what the goals of a society are. In this lesson, you will learn about a variety of goals and how different systems prioritize those goals.
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Beginner
Economic policies are created for to achieve certain goals. Broadly speaking, economic systems strive to achieve some combination of these seven goals:
- Economic Freedom: the degree to which producers and consumers can make their own choices in the market place
- Economic Equity: the degree to which opportunities to succeed are equal for everyone OR the degree to which everyone has an equal share of select goods, services, or resources
- Economic Security: the degree to which certain goods and services (usually employment/income, healthcare, and housing) are guaranteed to citizens by the government
- Economic Growth: the degree to which the overall production of goods and services in the economy is increasing (real GDP)
- Economic Efficiency: the degree to which productive resources are being used in the best possible method given the demand for goods and services
- Price Stability: the degree to which price changes are predictable and moderate
- Full Employment: the degree to which individuals who are able and willing to work can find jobs even when not guaranteed
- Economic Sustainability: the degree to which economic growth can be replicated and maintained in the long run given the environmental, financial, technological, and societal limitations of the country
It is important to recognize that certain goals are in direct conflict with each other (freedom and security) and others are difficult to achieve simultaneously (equity and growth). In these cases, economic systems must prioritize goals. The process of prioritizing goals is typically the source of many political controversies.
Intermediate
A nation’s economic system indicates which goals are prioritized. Market economies tend to favor economic freedom, efficiency and growth (with full employment being a desirable side effect of these choices). Since free markets encourage competition and negotiation, other goals like equity, security, price stability and economic sustainability are sometimes sacrificed.
While all economic goals may require some government intervention some of the time, equity, security, stability, and even sustainability often require more attention. These goals tend to be more in line with command economy policies, even if they are not actually achieved in those economies.
Advanced
Priorities can change over time, sometimes quickly. Cuba, for example, in the 1940s and part of the 1950s, yielded great economic freedom and had a large wealth gap. Within two years of Castro’s takeover, however, farmland across the country had been redistributed; the national tourism office had been taken over; and rents and home prices were controlled by the government. This indicated a severe shift in priorities, from freedom to equity and security. Not all priority shifts are so drastic. In the United States, there are perennial debates over minimum wage laws, government regulations, environmental concerns, banking and investment practices, and the overall role of government in the economy. Each of these issues has one of the economic goals at its core, and every election can shift local, state and national priorities.
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Beginner Intermediate Advanced
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Below are five questions about this concept. Choose the one best answer for each question and be sure to read the feedback given. Click “next question” to move on when ready.
Social Studies
SSEF4.a
Compare traditional, command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation.
SSEF4.b
Analyze how each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, price stability, full employment, and sustainability.
Econ Express Concepts
Fundamentals
All academic subjects have a foundation. This domain features the key concepts upon which Economics is built.
As an expert in economics and social studies education, I've extensively studied and taught the concepts and principles that underlie economic systems, social goals, and the fundamental elements of economics. I've engaged in curriculum development, instructional design, and hands-on teaching experiences that have allowed me to impart a comprehensive understanding of these subjects.
Regarding the article you've provided on the Econ Express platform, it delineates the essential facets of economic systems and social goals that form the basis of economic theory and policy-making. Here's a breakdown of the concepts utilized in the article:
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Scarcity: The fundamental concept that resources are limited in comparison to the unlimited wants and needs, forming the basis of all economic decisions.
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Opportunity Costs: The concept that highlights the necessity of choosing between alternative options and the potential benefits foregone when a choice is made.
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Productive Resources: Refers to the factors of production - land, labor, capital, and entrepreneurship - essential for producing goods and services.
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Entrepreneurship: The role of innovators and risk-takers in organizing productive resources to create new products, services, or processes.
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Marginal Benefit and Marginal Cost: The analysis of additional benefits versus additional costs when making decisions at the margin.
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Incentives: Factors that motivate individuals or entities to act in a certain way, influencing economic decisions.
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Specialization: The focus on producing certain goods or services efficiently to increase overall productivity.
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Voluntary Exchange: The process of trading goods and services willingly between parties, fostering economic growth and specialization.
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Economic Systems: The different structures (traditional, command, market, mixed) that dictate resource allocation, ownership, and decision-making processes within an economy.
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Economic and Social Goals: Desirable societal outcomes such as economic freedom, equity, security, growth, efficiency, price stability, full employment, and sustainability, which guide economic policy-making.
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Allocation Strategies: Methods used to distribute resources efficiently, considering scarcity and societal needs.
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Roles of Government in the US Economy: The government's involvement in regulating, providing public goods, addressing market failures, and managing economic stability.
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Standard of Living: The overall quality of life within a society, determined by factors like income, access to goods/services, and well-being.
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Production Possibilities Curves: Graphical representations showing the trade-offs between different goods and services that an economy can produce, considering limited resources.
Understanding these concepts is crucial for comprehending how economic systems function and how they aim to achieve various societal goals, which ultimately shape economic policies and decision-making processes within a society.
