Economic system

Economic system refers to the order of the whole of economic life in a country ( economy ). The focus is on the coordination of individual plans of private and public economic agents, in particular, what goods are produced in quantitative, qualitative, spatial and temporal relationship which labor and means of production are used where in the economic process and how the results are distributed.

Regarding the development of economic systems, there are two contrasting styles of thinking. Firstly, it is attributed to historical laws; by Walter Eucken this was called Thinking in History developments. Thus, the term economic system was originally introduced by Werner Sombart and was focused on economic history and economic sociology developments. Secondly, the development of economic systems is considered as the result of political decisions; Eucken called this thinking in orders.

The term is used inconsistently, especially in contrast to the concept of economic order. Often these terms are used interchangeably. Some authors understand, according to Walter Eucken under an economic system an ideal-typical model construction, while the term economic system called a real economy or a real typical model construction.

After the system-theoretical approach, the economic system forms the analytical preamble, which describes the in their capacity shaped by the people as producers and consumers economic process. The economic process, in turn, on the one hand shaped by the economic order, ie the statutorily established economic system and the traditional cultural and ethical- moral order, and the other by the economic factors ( the existing resources, human capital, etc.).

Term

Economic system is according to the system theory an analytical term for all those elements, structures that can be described by the common sense of need satisfaction in the face of scarce resources define as part of the social system from other systems such as politics and culture.

The economic system comprises, first, the economic elements and actors, especially private and public households and businesses, and their control over production and consumption means. In addition, secondly, the economic relations, ie the production, distribution and consumption processes in and between the economic units. Finally, third, resulting from the interaction of the elements and actors economic order part of the economic system; it is based on the institutional rules regarding property, contract, and market exchange ( economic system, economic system ). The economic system is strongly influenced by the interdependence with other social subsystems, especially with the political and legal system.

Function of economic systems

An economic system is characterized away its scarce goods in connection with the satisfaction of needs of the people. The discrepancy between unmet needs and limited resources required in each society of the problem solution and has resulted in the division of labor, highly specialized companies rise to a cause and effect relationships in their complex, can hardly be over -looking network. The economic system is the development, distribution and consumption of goods under the principle of sound for the satisfaction of private and public demand. In contrast, the political system identifies the exercise of power on the basis of generally reserved to the State of the potential threat of force and application as well as the political decision-making and its institutional differentiation.

An economic system has to fulfill the following tasks:

• Allocation of economic decision-making powers ( Who decides - individual or authority / bottom up or top down? )
• Control the proper use of the means of production and punishment of bad planning ( who controls and decides - market and competition as selection procedures or state and planning)
• Information of economic agents about the goods shortages and other economically relevant facts ( How are prices formed - free determination or state? )
• Incentives of economic agents to efficient and innovative behavior ( satisfaction of needs of consumers and competition as a discovery procedure or central planning and commendation? )
• Coordinating the planning and actions of economic agents in the productive economy process (supply and demand make the price or central planning coordinated? )

Types

Economic systems have a rational system structure or a system specific order. This depends on the economic order principles, mechanisms and arrangements that link to a macroeconomic control and coordination system and align the economic agents in their need satisfaction and reducing the shortage of goods. Those control and coordination elements that brings economic activity in their interaction, are object of knowledge of the economic system theory.

Decisive influence on the character of the system-specific order to practice the following factors:

• Ownership ( private or state ownership ) and
• Type of coordination ( decentralized or centralized planning and direction ).
• In addition, if the pricing is free to open markets or influenced by government intervention or is fixed and
• The degree of openness of the economic system over other economies ( international division of labor and self-sufficiency ).

The practice of economic policy and planning policy pursued change the economic system significantly.

As basic forms are:

• Market economy ( private ownership of the means of production, pricing by supply and demand, decentralized planning of economic processes )
• Centrally planned economy ( collective / state ownership of the means of production, fixed prices and wages, central planning of economic processes )

These shapes are ideal-typical nature. In reality, occur almost exclusively mixed forms ( "mixed economies" ) on. Interesting is the real typical situation of trade, ( Schenk ) depending on the specific economic system a mixture of exclusively or predominantly systemic and systemindifferenten functions takes or should take over.

In addition, there are social theory and political attempts to realize a third way between capitalism and socialism. The longing for a reconciliation of these two forms is exemplified expressed in the "humane economic democracy " ( Ota Sik ), the " socialist market economy " or " regulated market economy" ( Mikhail Gorbachev ) and the free economy ( Silvio Gesell).

As a political term also denotes the Welfare State the historical development of the German government and economic system. The welfare state is characterized by the tendency to subordinate the personal preference, initiative and responsibility of the individual citizen of collective security and the value of the Code of the rulers.

Demarcation

The term economic system can differentiate themselves from the terms economic order ( = totality of the economic environment / organization of the economy ), economic constitution ( = economically relevant articles of the Constitution, laws and regulations as well as the self-created law of the economy), business style ( = classification of historical farming practices) and economic form ( = division of the means of production, between state and private ownership ).

Historical manifestations

The historical manifestations German economies in the modern era can be divided into the following non-uniform terms, which are derived mainly from the specific economic conditions:

• Federal Republic of Germany - to 1967 Social Market Economy / 1967 " mixed economy "
• German Democratic Republic - a centrally planned economy
• Nazism - Nazi war economy
• Weimar Republic - social welfare transitional form
• German Empire - Organized Capitalism
• German Bund - mixed: feudal- sized and liberal- bourgeois orders