Editing Economic system (section)

{{Short description|System of ownership, production and exchange}}
[[File:DiagFuncMacroSyst.pdf|thumb|upright=0.9|[[Circular flow of income|Circulation model]] of [[Stock and flow|economic flows]] for a [[closed economy|closed]] [[market economy]]. In this model the use of [[natural resources]] and the generation of [[waste]] (like [[greenhouse gas]]es) is not included.]]
{{economic systems sidebar}}
{{economics sidebar|concepts}}
An '''economic system''', or '''economic order''',<ref>Daniel J. Cantor, Juliet B. Schor, ''Tunnel Vision: Labor, the World Economy, and Central America'',  End Press, 1987, p. 21: "By economic system or economic order, we mean the principles, laws, institutions, and understandings business is conducted."</ref> is a [[system]] of [[Production (economics)|production]], [[resource allocation]] and [[Distribution (economics)|distribution]] of [[goods and services]] within an [[economy]]. It includes the combination of the various [[institution]]s, agencies, entities, decision-making processes, and patterns of [[Consumer|consumption]] that comprise the economic structure of a given community.

An economic system is a type of [[social system]]. The [[mode of production]] is a related concept.<ref>{{cite book|last=Gregory and Stuart|first=Paul and Robert|title=The Global Economy and its Economic Systems|publisher=South-Western College Pub|date=February 28, 2013|isbn=978-1285055350|pages=56|quote=Economic system – A set of institutions for decision making and for the implementation of decisions concerning production, income, and consumption within a given geographic area.}}</ref> All economic systems must confront and solve the four fundamental [[economic problem]]s:
* What kinds and quantities of goods shall be produced: This fundamental economic problem is anchored on the theory of pricing. The theory of pricing, in this context, has to do with the economic decision-making between the production of capital goods and consumer goods in the economy in the face of scarce resources. In this regard, the critical evaluation of the needs of the society based on population distribution in terms of age, sex, occupation, and geography is very pertinent.  
* How goods shall be produced: The fundamental problem of how goods shall be produced is largely hinged on the least-cost method of production to be adopted as gainfully peculiar to the economically decided goods and services to be produced. On a broad note, the possible production method includes labor-intensive and capital-intensive methods.    
* How the output will be distributed: Production is said to be completed when the goods get to the final consumers. This fundamental problem  clogs in the wheel of the chain of economic resources distributions can reduce to the barest minimum and optimize consumers' satisfaction. 
* When to produce:<ref>Samuelson, P. Anthony., Samuelson, W. (1980). Economics. 11th ed. / New York: McGraw-Hill. p. 34</ref> Consumer satisfaction is partly a function of seasonal analysis as the forces of demand and supply have a lot to do with time. This fundamental economic problem requires an intensive study of time dynamics and seasonal variation vis-a-vis the satisfaction of consumers' needs. It is noteworthy to state that solutions to these fundamental problems can be determined by the type of economic system.

The study of economic systems includes how these various agencies and institutions are linked to one another, how information flows between them, and the social relations within the system (including [[Property rights (economics)|property rights]] and the structure of management). The analysis of economic systems traditionally focused on the dichotomies and comparisons between [[market economies]] and [[planned economies]] and on the distinctions between [[capitalism]] and [[socialism]].<ref>{{cite book|last=Rosser|first=Mariana V. and J Barkley Jr.|title=Comparative Economics in a Transforming World Economy|url=https://archive.org/details/comparativeecono00jrjb|url-access=limited|publisher=MIT Press|date=July 23, 2003|isbn=978-0262182348|pages=[https://archive.org/details/comparativeecono00jrjb/page/n12 1]|quote=Chapter 1 presents definitions and basic examples of the categories used in this book: tradition, market, and command for allocative mechanisms and capitalism and socialism for ownership systems.}}</ref> Subsequently, the categorization of economic systems expanded to include other topics and models that do not conform to the traditional dichotomy.

Today the dominant form of economic organization at the world level is based on market-oriented [[mixed economy|mixed economies]].<ref>• [[Paul A. Samuelson]] and [[William D. Nordhaus]] (2004). ''[[Economics (textbook)|Economics]]'', McGraw-Hill, Glossary of Terms, "Mixed economy"; ch. 1, (section) Market, Command, and Mixed Economies.<br>• [[Alan V. Deardorff]] (2006). ''Glossary of International Economics'', [http://www-personal.umich.edu/~alandear/glossary/m.html#MixedEconomy Mixed economy].</ref> An economic system can be considered a part of the [[social system]] and hierarchically equal to the [[law system]], [[political system]], [[cultural]] and so on. There is often a strong correlation between certain [[ideology|ideologies]], [[political system]]s and certain economic systems (for example, consider the meanings of the term "communism"). Many economic systems overlap each other in various areas (for example, the term "mixed economy" can be argued to include elements from various systems). There are also various mutually exclusive hierarchical categorizations.