traditional economic system

Definition, Functions, Types, Characteristics, Goods, Bads, Advantages and Disadvantages of Traditional, Central, Liberal and Mixed Economic Systems

Below is a discussion of economic problems, economic system, meaning of economic system, function of economic system, types of economic systems, traditional economic system, characteristics of traditional economic system, central economic system, characteristics of central economic system, quality of central economic system, bad command economy system, system Liberal economic, laissez-faire, countries that adhere to the liberal economic system, characteristics of the liberal economic system, the advantages of the liberal economic system, the weakness of the liberal economic system, the mixed economic system, the characteristics of the mixed economic system, the good of the mixed economic system, the mixed economy system bad.

Economic systems and economic problems

After studying the three basic economic problems, we shall now study the economic system together. The decisions that each country makes on the above issues are not the same. The decision depends on the economic system adopted by the country.

Define the economic system

The economic life of a country is the result of the economic activities of the entire population, large and small firms, which produce goods and services.

The level of a country’s economy should be different and so should the economic organization that is practiced in each country. Do you know the meaning of economic system?

An economic system is an organization consisting of several institutions or institutions (political, economic, social, ideas) that are unit and influence each other in solving the basic problems of the economy, namely production, distribution and consumption so that all needs are. interpolation.

Every country seeks to regulate the exchange of goods and services so that the welfare of its people increases. If the economic system could be described it would appear as follows.

Economic System Functions

Among the different economic systems that exist in the world, they have jobs in economics, including the following.

Offer incentives for production.
It provides a method/method for coordinating individual activities in the economy.
Providing a certain mechanism so that production is properly distributed among the members of society.

economic system standards

Every country wants good and stable economic growth. For the realization of these ideals, there are standards possessed if the economic system can be said to be relatively good, that is, as follows.

Does the economic system in question offer the possibility of achieving a high standard of living?
Is it possible to achieve steady economic growth?
Does the economic system reasonably respect the economic freedom of individuals?
Does the economic system provide economic certainty for all members of society?
Does the economic system produce goods and services that meet the needs of consumers?
Does the economic system show an adequate distribution of income?

types of economic systems

Did you know that there are different types of economic systems in this world? Can you name and explain one by one? How could this happen?

Let’s try together to answer all the above questions! What makes the economic system of a country different is as follows.

Whether the government is interfering in economic activities or not.
The system of government approved by the state.
State ownership of the factors of production.
The resources that exist in a country, whether human resources or owned natural resources.
There are different types of economic systems in the world, namely traditional economic systems, centralized/restricted economic systems, liberal economic systems, and mixed economic systems. Here is the explanation.

a. traditional economic system

A traditional economic system is an economic system in which economic life is organized according to the customs and traditions of society from generation to generation by relying on the factors of production as they are.

1) Characteristics of a traditional economic system

There is no clear division of labor.
Dependence on the agricultural/agricultural sector.
The traditional ties are familial, so they are less dynamic.
Simple production technology.

2) The good of the traditional economic system

Create a sense of kinship and mutual cooperation between each individual to meet the needs of his life.
Barter trade is based on a sense of honesty rather than the pursuit of profit.

3) Disadvantages of the traditional economic system

The general mentality of the community remains constant.
The results of production are limited because they depend only on the natural factors of production and labor as they are.

B. Centralized/Oriented Economic System

A central economic system is an economic system in which the government plays the most important or dominant role in regulating economic activity.

Hegemony is achieved through restrictions on the economic activities of the members of the community. Countries that adhere to this system include: Russia, China, and Eastern European countries (the former Soviet Union).

Characteristics of a central economic system

Economic activities of production, distribution, consumption as well as prices are determined by the government through state regulations.
Individual or private property rights are not recognized, therefore individual freedom of doing business does not exist.
The means is of production and of controlled of state.
Advantages of a centralized economic system
It is easier for the government to do oversight and control.
The government bears full responsibility for all economic activities.
The prosperity of society is evenly distributed.
Development planning is achieved more quickly.

Disadvantages of a centralized/directed economic system

There is a stifling of people’s creative power that almost all initiatives and innovations are initiated by the government.
Existence of a black market due to very strict restrictions by the government.
The members of the society do not guarantee the selection and determination of the type of work and the selection of consumer goods required.
Government is patriarchal, which means that what the government regulates/determines is valid and must be obeyed.

c. liberal economic system

A liberal economic system is an economic system that requires as much freedom as possible for each individual to take economic actions without government interference.

The situation in which the government is completely incapable of making economic decisions in economic terms is called laissez-faire.

Countries that adhere to a liberal economic system are the United States, Britain, France, Belgium, Ireland, Switzerland, Canada, and Indonesia, which adopted a liberal economic system in the 1950s.

Characteristics of a liberal economic system

Recognizing the freedom of the private sector/society to take economic measures.
Recognize the freedom to own capital goods (capital goods).
To carry out economic business based on the spirit of pursuit of their own profit.

Advantages/Advantages of a Liberal Economic System

The presence of competition to encourage business progress.
Thus, government intervention in the small economy sector encourages expansion of private sector opportunities.
Production depends on the market demand or the needs of the society.
The state’s recognition of property rights encourages the spirit of community business.

Disadvantages/weaknesses of the liberal economic system

Existence of unfair competitive practices, i.e. oppression of the weak.
Unfair competition can lead to monopolies harmful to society.
The emergence of dishonest practices based on the pursuit of maximum profit, so that the public interest is marginalized.

Dr.. mixed economic system

This is an economic system where on the one hand the government gives freedom to the society to try to carry out economic activities, but on the other hand the government intervenes in the economy which aims to avoid the total control of a group of people over the economic resources.

Government intervention is in the form of:

Develop regulations or laws that regulate and supervise the economic activities of the community.
Creation of state companies whose activities are almost identical to private commercial activities, which are aimed at the interest of society as a whole.
The government sets various policies in the economic sector.

Characteristics of a Mixed Economic System

The existence of restrictions on the private sector by the state in areas that affect the livelihood of the people controlled by the state.
The mechanism of economic activity that takes place in the market is the government’s intervention in various economic policies.
Individual property rights are recognised, but their use must not harm the public interest.

Advantages/Advantages of Mixed Economic System

The government-controlled economic sector is more focused on the interests of society.
Clearly recognize individual/private rights.
Prices are easier to control.

Disadvantages of a mixed economic system

The role of the government is heavier than the role of the private sector.
Emergence of KKN (Corruption, Collusion and Nepotism) in the government because there are many sectors of production which bring more profits to the government while there is little oversight.

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