ECONOMIC SYSTEMS

SOCIETY'S ANSWER TO

WHAT, HOW, AND WHO?

 

The Problem of "Scarcity": human wants are unlimited, resources (the stuff by which we get things done) are limited.

 

            All societies, past and present, have had to seek answers to the fundamental questions of What, How, and Who.  For this purpose each society adopted an economic system that represented a method of  dealing with these questions.  Generally, every economic system can be classified as a traditional, command, or market economy, although most are a combination of these yet are referred to only one type for political reasons.

 

THREE TYPES: Copy in your notes the blue sections.

            TRADITIONAL: The 3 questions (what, how and who) are decided on the basis of customs, social patterns, religion or other ideas handed down through time.

 

            MARKET: Here the major decisions regarding the 3 questions are made by individual consumers, businesses and, to a very minor extent, government. Buyers and sellers make their decision known in the market place.

 

            PUBLIC (COMMAND): Here the major decisions to the economic questions are made by the government on behalf of the citizens it serves.  The power of the government in such decisions varies.

 

EXERCISE: After reviewing the 3 types of economies above read the examples of economic activity below and:

 

            1. Identify if it involves a What, How, or Who question.

 

            REMEMBER: What will be produced?

 

                                    How will it be produced?

 

                                    Who will get what is produced?

 

            2. Identify if the decision reflects what you would find in a Traditional, Public (command),     or Market economic system.

 

EXAMPLES:

 

A. The Catholic Church opposes the development of a female condom. Hint

B. A law makes it illegal for a landlord to consider race as a factor in determining who he/she may rent his/her apartment to. Hint

C. A local ordinance outlaws the sale of assault weapons.

D. Gun production is up in the U.S. in response to increased demand.

E. At Moma's Pizza, she makes her pies the old fashioned way.

F. Wealthy Americans often send their children to private schools.

G. Government requires more testing of silicone breast implants before they can be put on the market.

H. G.I. Joe advertisements appear on shows that have primarily boy viewers.

I. Women in the U.S. earn 70 cents for every dollar a man makes.

J. The government controls the development of nuclear power plants.

K. An automobile manufacturer lays-off workers and replaces them with robots that lower production costs.

L. Since Shelia, like 40 million other Americans, is poor, she cannot afford an abortion.

M. A manufacturer decides to dump his/her company’s waste into the Hudson River in an effort to keep production costs low.

 

 

 

 

Footnotes

 

You may recall that the What, How and Who questions arise from limited resources.  This forces all societies to make economic decisions. Back to the reading.

Hints

A church is making a decision regarding WHAT will be produced.

A business man is making a decision about WHO gets an apartment.

Back to the exercise.