Four Major Types of Economic Systems, Essay Example

There are four major types of economic systems. The four types are traditional, command, market, and mixed. Each type of economic system has pros and cons. Below, I will describe each type of economic system briefly.

Traditional economies produce products according to their belief system and traditions. This includes religion. Many portions of the world still have traditional economies. This type of economy will never see the type of profit or surplus that other types of economies do, but it also does not see the same amount of waste.

Command economies are the next step up from traditional economies. The key feature is that the command economy is controlled by one centralized figure, usually the government. This type of economy is usually found in communist countries. Often, in this type of command, the government only cares about the most profitable of resources, and things like farming are left to the control of the people.

Market economies are similar to free markets. The government does not control the resources, goods, or any other major part of the economy. In this type of economy, the people can “have their hands in the cookie jar” as well. The government does not assume control of the most profitable resources, leaving the scraps to the people.

Mixed economies are usually a mix of a command economy and a market economy. For obvious reasons, traditional economies do not generally mix well. In this type of economy, the government controls certain areas of the economy. However, in a mixed economy, the areas that the government controls are strictly the most valuable resources. In a mixed economy, just because the government controls certain areas does not mean that the private sector cannot invest as well.

It is important for internationalizing firms to understand the different types of economies because they need to understand the ways that the countries they are trading with are going to behave. Ideally, in a free market, the government would have no input on any of the trading.