What are the advantages of the various types of economic systems?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Most economists argue that there are three economic systems, three ways that economies can be organized.  These are command economies, traditional economies, and market economies.  Each of the three has advantages and disadvantages.

  • Command economies are said to be better at adapting to changing needs.  A command economy, for example, would be able to change its ways to reduce fuel consumption and prevent climate change simply by having the government order changes.
  • Traditional economies are said to offer stability and consistency.  People in such an economy know what they will do with their lives.  They do not have to have stress and uncertainty as they try to decide what to do, how to do it, etc.
  • Market economies are said to offer the greatest individual freedom as well as the widest variety of goods at the lowest prices.  In such economies, people can do pretty much whatever they want without government or tradition telling them not to.  Competition gives us everything we can conceive of wanting at the lowest possible price.

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