What is an economy?

What is an economy?

The Oxford English dictionary defines it as: the state of a country or region in terms of the production and consumption of goods and services and the supply of money. At first glance, this may seem a little frightening, but let's just take a step back. Firstly, let's take 'production and consumption': all this means is the collection of things that people make and buy. Goods and services are just the types of things that we can buy and sell, and money is how we do that. So know that we know what all of that means we can fully understand that all an economy is, is the collection of all of the buyers, sellers, and money within a country or region.

Types of economy.

There are three main types of economy that are discussed in today's world: Command, Free Market, and Mixed. You may not know exactly what I'm talking about but it'll all become clear soon. These different names of economy types basically describe how they are organised which helps us understand how best to think about them.

Command Economies

A Command Economy is an economy in which the government owns and controls ALL assets and distributes them how they see fit. One thing to keep in mind when studying economics is that we always have to find the most extreme or ideal version of something before we can really define the other versions. There are NO command economies in existence, nor have there ever been; the closest that the world has ever had was probably the USSR (even then, it wasn't a 'pure' command economy). If you ever hear people talking about socialism, communism, or just being 'left winged' what they mean is that they would prefer a MORE command based economy.

Free Market Economies

A Free Market Economy (sometimes just a 'Market Economy') is an economy in which there is NO government whatsoever: anyone can buy anything, at any time, in any place as long as they have money. Once again, we've got to remember that this is a very extreme example of Capitalism and doesn't exist in the real world. The closest examples that we have are places like the USA and Hong Kong where there are very few regulations. If people say they are a capitalist or right winged, they mean that they prefer a MORE free market based economy

Mixed Economies

A Mixed Economy is one in which the government control some things, but other things are controlled by the general populous: EVERY economy worldwide is mixed- bar none. This is the case because governments are always needed for things like policing and infrastructure (roads , schools, and other stuff like that) without which we could not function really. Don't get tricked though! A mixed economy is not a perfect 50/50 split, as I said earlier, some countries can be more command based or more free market based.

Left or Right?

Well, I am in no position to tell you whether to be left or right winged- neither is anyone else for that matter! All that I, and anyone else, should tell you is the facts and arguments for and against each side. As a right winged economy, large companies and individuals will face less tax, but this also means that they will have to pay for more things, and there will be less support and regulation: in a perfectly free market economy, a 6 year old could go and buy a gun. On the other hand, in a perfectly command economy, you would get no choice in whether you get breakfast that day or not. So instead of me telling you, why don't you tell yourself; as we progress, you'll probably get a better idea of where you lie on the sliding scale of left and right.

Discussion Point

From what you know, what would you want if you had the chance to change your country? Market, command, or mixed?