Looking to get into investing, but not sure where to start?
More than likely, your questions look like this:
- What is an economic system?
- What is a traditional economy?
- What are the different types of economies I can enter?
The United States economy is one that many countries try to copy to varying degrees of success. This is because of its massive $20 trillion GDP and status as the top economic power in the world.
Keep reading to find out about the different types of economic systems and how you can benefit.
The Different Types of Economic Systems
The different types of economic systems, sorted by earliest to latest, are primitivism, feudalism, capitalism, socialism, and communism.
Since some economic systems have been basically abandoned in modern times. Another way to look at it is:
- Traditional
- Command
- Market
- Mixed
When most people think about economies today, this is the lens with which they view them.
This more modern view is less politically entwined, especially since most government models have evolved to be non-exclusionary. Most countries use a mixed economic system.
Police, defense, and most public services are socialist economic models, paid for by taxes. Yet the same government likely allows a measure of free-market capitalism. It may even dictate the economic focus on some level to preserve stability.
The reason mixed economies are popular is that every type of pure economy is harmful in its mature stages.
The Different Types of Economies in Detail
Traditional economies in their pure form produce no profit or surplus. It’s sustainable, but you’ll fall behind other governments and get taken over.
Command economies are dependent on a central government. It controls all economic decisions that serve to preserve the government system. This is almost always the case with fascism, dictatorships, and communist governments, and doesn’t serve the people.
A pure market is almost pure anarchy at first and later stabilizes into monopolies. This is why most governments have anti-trust laws to prevent their market economies from getting this way.
It also doesn’t serve the people. Rather, it creates oligarchies and almost a form of feudalism as “nobility” arises in the form of corporations and executives.
Benefiting From Understanding the Economy
There’s a lot to economies beyond the basics of what we’ve covered. For more tips on investment in your economy of choice and how to remain protected, it’s good listen to podcasts for finance professionals.
Keeping up with economy and finance news sites and media channels are a great way to get overall pictures of an economy as well.
However, it’s important not to blindly invest but to do your own research and think for yourself.
Economic Systems: Using What You Learned
Now that you know about the different types of economies and how they often blend together, you also have new insights into the United States economy (among others).
No doubt this primer on the types of economic systems will help you make better investment choices, too.
For more advice, keep browsing our articles for the latest and best news and information in finance and business.