View source for Economy-General Foundational

This page is a "foundation" page not a "solutions" page. It summarizes some of the economic models that have been used in the past. The potential "solutions" are listed on a separate page.

  

===== Next a list of the four basic economic systems. =====

1. Traditional Economic System.

2. The Command Economic System. 

3. The Market Economic System.

4. The Mixed Economic System.

===== Next; a breakdown of variations of the four basic economic systems. =====

=== Market Economy: === 
[https://en.wikipedia.org/wiki/Market_economy From: Market Economy Wikipedia]

===== 1. Laissez-faire =====

Laissez-faire is synonymous with what was referred to as strict capitalist free market economy during the early and mid-19th century as a classical liberal (right-libertarian) ideal to achieve. It is generally understood that the necessary components for the functioning of an idealized free market include the complete absence of government regulation, subsidies, artificial price pressures, and government-granted monopolies (usually classified as coercive monopoly by free market advocates) and no taxes or tariffs other than what is necessary for the government to provide protection from coercion and theft, maintaining peace and property rights, and providing for basic public goods. Right-libertarian advocates of anarcho-capitalism see the state as morally illegitimate and economically unnecessary and destructive.

===== 2. Free-Market Economy ===== 

Free-market economy refers to an economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets, private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights.

===== 3. Welfare Capitalism =====

Welfare capitalism refers to a capitalist economy that includes public policies favoring extensive provisions for social welfare services. The economic mechanism involves a free market and the predominance of privately owned enterprises in the economy, but public provision of universal welfare services aimed at enhancing individual autonomy and maximizing equality. Examples of contemporary welfare capitalism include the Nordic model of capitalism predominant in Northern Europe

===== 4. Anglo-Saxon model =====

Anglo-Saxon capitalism refers to the form of capitalism predominant in Anglophone countries and typified by the economy of the United States. It is contrasted with European models of capitalism such as the continental Social market model and the Nordic model. Anglo-Saxon capitalism refers to a macroeconomic policy regime and capital market structure common to the Anglophone economies. Among these characteristics are low rates of taxation, more open financial markets, lower labor market protections, and a less generous welfare state eschewing collective bargaining schemes found in the continental and northern European models of capitalism.

===== 5. East Asian model =====

The East Asian model of capitalism involves a strong role for state investment, and in some instances involves state-owned enterprises. The state takes an active role in promoting economic development through subsidies, the facilitation of "national champions", and an export-based model of growth. The actual practice of this model varies by country. This designation has been applied to the economies of Singapore, Japan, Taiwan, South Korea and the People's Republic of China.

===== 6. Social Market Economy =====

This model was implemented by Alfred Müller-Armack and Ludwig Erhard after World War II in West Germany. The social market economic model (sometimes called "Rhine capitalism") is based upon the idea of realizing the benefits of a free market economy, especially economic performance and high supply of goods, while avoiding disadvantages such as market failure, destructive competition, concentration of economic power and the socially harmful effects of market processes. The aim of the social market economy is to realize greatest prosperity combined with best possible social security. One difference from the free market economy is that the state is not passive, but takes active regulatory measures. The social policy objectives include employment, housing and education policies, as well as a socio-politically motivated balancing of the distribution of income growth. Characteristics of social market economies are a strong competition policy and a contractionary monetary policy. The philosophical background is Neoliberalism or Ordoliberalism.

===== 7. Public Ownership models =====

In the 1930s the economists Oskar Lange and Abba Lerner developed a model of socialism that posited that a public body (dubbed the "Central Planning Board") could set prices through a trial-and-error approach until they equaled the marginal cost of production in order to achieve perfect competition and pareto optimality. In this model of socialism, firms would be state-owned and managed by their employees, and the profits would be disbursed among the population in a social dividend. This model came to be referred to as "market socialism" because it involved the use of money, a price system, and simulated capital markets; all of which were absent from traditional of non-market socialism.

A more contemporary model of market socialism is that put forth by the American economist John Roemer, referred to as Economic democracy. In this model, social ownership is achieved through public ownership of equity in a market economy. A Bureau of Public Ownership (BPO) would own controlling shares in publicly listed firms, so that the profits generated would be used for public finance and the provision of a basic income.

===== 8. Cooperative Socialism =====

Libertarian socialists and left-anarchists often promote a form of market socialism in which enterprises are owned and managed cooperatively by their workforce so that the profits directly remunerate the employee-owners. These cooperative enterprises would compete with each other in the same way private companies compete with each other in a capitalist market. The first major elaboration of this type of market socialism was made by Pierre Joseph Proudhon and was called "mutualism".

Self-managed market socialism was promoted in Yugoslavia by economists Branko Horvat and Jaroslav Vanek. In the self-managed model of socialism, firms would be directly owned by their employees and the management board would be elected by employees. These cooperative firms would compete with each other in a market for both capital goods and for selling consumer goods.

===== 9. Socialist Market Economy =====

Following the 1978 reforms, the People's Republic of China developed what it calls a "socialist market economy", in which most of the economy is under state ownership, with the state enterprises organized as joint-stock companies with various government agencies owning controlling shares through a shareholder system. Prices are set by a largely free-price system and the state-owned enterprises are not subjected to micromanagement by a government planning agency. A similar system called "socialist-oriented market economy" has emerged in Vietnam following the Đổi Mới reforms in 1986. This system is frequently characterized as "state capitalism" instead of market socialism because there is no meaningful degree of employee self-management in firms, because the state enterprises retain their profits instead of distributing them to the workforce or government, and because many function as de facto private enterprises. The profits neither finance a social dividend to benefit the population at large, nor do they accrue to their employees.

In the People's Republic of China, this economic model is presented as a "preliminary stage of socialism" to explain the dominance of capitalistic management practices and forms of enterprise organization in both the state and non-state sectors.

=== Mixed Economic Systems ===

===== 1. American School ===== 

It is the macroeconomic philosophy that dominated United States national policies from the time of the American Civil War until the mid-twentieth century. Closely related to mercantilism, it can be seen as contrary to classical economics. It consisted of these three core policies:

1. protecting industry through selective high tariffs (especially 1861–1932) and through subsidies (especially 1932–70)
2. government investments in infrastructure creating targeted internal improvements (especially in transportation)
3. a national bank with policies that promote the growth of productive enterprises rather than speculation.

It is a capitalist economic school based on the Hamiltonian economic program. The American School of capitalism was intended to allow the United States to become economically independent and nationally self-sufficient.

===== 2. Dirigisme =====

Dirigisme or dirigism (from French diriger, meaning "to direct") is an economic system where the state exerts a strong directive influence over investment. It designates a capitalist economy in which the state plays a strong directive role, as opposed to a merely regulatory one.

The term emerged in the post-war era to describe the economic policies of the French economy, which included substantial state-directed investment, the use of indicative economic planning to supplement the market mechanism, and the establishment of state enterprises in strategic sectors of the French economy. It resulted in an unprecedented economic and demographic growth, leading to the coinage of the term Trente Glorieuses ("Thirty Glorious [years]").

Most modern economies can be characterized as dirigiste to some degree – for instance, the state may exercise directive action by performing or subsidizing research and development of new technologies, through government procurement (especially military) or through state-run research institutes.

===== 3. Nordic Model =====

The Nordic model (also called Nordic capitalism or Nordic social democracy) refers to the economic and social policies common to the Nordic countries (Denmark, Finland, Norway, Iceland and Sweden). This includes a combination of free market capitalism with a comprehensive welfare state and collective bargaining at the national level. The Nordic model began to earn attention after World War II.

Although there are significant differences among the Nordic countries, they all share some common traits. These include support for a "universalist" welfare state aimed specifically at enhancing individual autonomy and promoting social mobility; a corporatist system involving a tripartite arrangement where representatives of labor and employers negotiate wages and labor market policy mediated by the government; and a commitment to widespread private ownership, free markets and free trade.