Wednesday, August 30, 2017

Continuum of Economic Systems

Labeling and characterizing particular countries economic systems based on how they are organized to allocate societies scarce resources can be a tricky proposition.  People tend to insert their own biases in assessing the label.

Here is a simple presentation of the "facts".  We can debate/argue the specifics of where a particular country falls on the continuum (I inserted select countries on where I think they fall), but the over-arching considerations should be what I outlined in the textbook:

1.  The level of government ownership/control of societal resources.
2.  The level of regulation and taxation over economic activity within the country.

These are broad, for certain, but I believe serve as a jumping off point for discussion.

For instance, take the US.

The Private Sector holds a vast majority of overall societal resources, but not all.  National Parks are one significant "land" resource that I can think of that the Federal Government owns outright.  Is this "socialism" in the context of all societal resources combined?  I think not so that is why I put it closer to Free Market than Socialism. Does the US regulate/tax economic activity?  Yes, to some degree so we cannot give it the full label "Free Market". With this one you have to consider "relative to what/who?"

In this case I choose the UK. In the UK the healthcare system is owned/operated by the government and they have a higher level of taxation compared to the US (this is a generalized statement on my part).

After understanding where you fall on this line, the debate becomes which way is "best" for your country to move---towards Free Markets to the left or Socialism/Communism to the right.  This is political tension that is derived from the economics.
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