Types of Economies

Reading this article (click here), the first question I would ask any young person is, do you know the difference between socialism and capitalism, and for that matter, fascism and communism?

Most get their information from Facebook posts or articles and neither spend much time defining and describing the different types of economies. There are just four types of economies:

1. Traditional Economy: typically a farm economy where people make what they need and generally barter away their surpluses for other things they may need or want. The means of production and property are privately owned usually by individuals.

2. Command Economy: The government plans and controls what is produced, the price, quality etc. Socialism is a command economy where the means of production is owned by the people and centralized planning determines what is produced and the cost, what people make, etc. The people own private property. Production and its wealth is to benefit society (not the individuals in the case of capitalism). Communism is a extreme command economy where the means and production AND most private property is owned by the government. There is extensive central planning, like the 5 year plans of the old USSR. Production and its wealth is to benefit society.

3. Market Economy: The means of production and private property is owned by the individual and private company. What is produced, how much, its price, etc is determined by the market. Production and its wealth is to benefit the individual. The US at its founding for the most part was a market economy.

4. Mixed Economy: Combines planned and free market economies. For example, the US today is a mixed economy as well as most of the countries in Europe. For example, IBM is a private company owning the means of production, its private board determines what is produced, the price, quality and much of this is determined by market forces. The companies are privately owned and investments are from private sources. The school system is a socialist system where the schools are owned by the government, the workers are paid by the government and the cost of the product is free to any user, that is paid for by the masses.

Capitalism and socialism are economic systems. Communism and Fascism are economic and political systems. For instance, fascism is a mixed economy where the means of production are privately owned, but what is produced and how much, etc is determined by the state. Not for the benefit of society (like socialism) or the benefit of the individual (like capitalism), but for the benefit and aims of the state.