Economic Systems and Concepts: A Comprehensive Overview

Posted on Jan 23, 2025 in Economy

Economic Systems Through History

  • Barter Economy: A system in which goods and services are directly exchanged for other similar goods and services, regardless of currency.
  • Slave Economy: An economy based on the exploitation of slave labor to benefit the ruling class.
  • Feudal Economy: Society was divided into nobility, clergy, and peasantry. The first two groups were the owners of the land, which was worked by the third party on behalf of the former.
  • Autarky: A system in which a territory intends to be self-sufficient, thus disregarding imports.
  • Mercantilism: A system of the 16th and 17th centuries aimed at the accumulation of gold, promoting exports and hindering imports. It established very protectionist tariffs and monopolies, and the economy was tightly controlled by the state.
  • Physiocracy: A reaction against the lack of economic freedom generated by the previous system. Physiocrats held that the world would work better if there were no rigid rules. Wealth is not gold if you cannot consume it without impoverishing: nature. It advocates the expansion of agriculture.
  • Liberalism: The state should not intervene. “Laissez faire, laissez passer, le monde va de lui même” (“Let it be, let it pass, the world goes by itself”). Therefore, the abolition of tariffs and monopolies. Only the law of supply and demand. Its great ideologist is Adam Smith. Wealth was industry and trade (“Unemployed agriculture produces nothing”).
  • Capitalism: Private ownership of the means of production. Profit. Economic freedom: occurs for which you can buy. The state has to limit itself to creating the economic framework that guarantees freedom of the market. Prices are regulated by supply and demand.
  • Socialism: A reaction against the previous system. No private ownership of the means of production. Seeking equitable distribution of income. Planned economy: meeting needs, marked prices.

Key Economic Concepts

  • Economy: Responsible for the administration or use of existing resources in order to satisfy the needs people and groups have.
  • Property Services: Are limited and can be exhausted. They are bought and sold, they are goods, and therefore have a price.
  • Services: Tasks that are provided to individuals or groups but do not produce material goods.
  • Fixed Capital: Buildings, machinery, vehicles, etc.
  • Capital: Money and commodities.
  • Supply: The set of goods and services that are offered for sale. It reflects the behavior of sellers.
  • Demand: The set of goods and services consumers are willing to buy for a certain price.
  • Sign: An economic indicator that reflects the state of the economy of a country over a period of time.
  • CPI (Consumer Price Index): Provides information about the evolution of prices of goods and services purchased by consumers.
  • Social Security: A set of dependent administration bodies whose purpose is to protect citizens in times of need. Revenues come from contributions (taxes).
  • Unions: Represent workers.
  • Employers: Employers’ representatives.
  • Development Indicators (Big Mac Index): This indicator, developed by the British publication “The Economist” since 1986, is obtained from the price and type of hamburger that is taken in each country. For example, it costs $2.90 in the US, $4.90 in Switzerland, and $0.26 in Morocco.