.png)
In this world, countries, regions and even continents are able to function as economies, serving the role to transform resources into goods and services, and ultimately trade between each other for a functioning society. With influences from geo-politics, trade relations and various other factors, economists are able to define and categorise all types of economies (generally as countries) into 1 of the 4 types. Stretching from roles of the government, systems of managing resources and political characteristics, holding the ability to recognise these categories allows you to see and realise the many reasons behind how and why these countries and regions function.
Traditional Economy
By its name, Traditional Economy allocates the production of goods and services based on cultural customs and religious values. This type of economy is commonly seen before modern developments when a region isn’t established with strong political influences. This adoption of traditional economy has drastically declined and may possibly be seen in some indigenous regions such as the Amazon Tribe. Such an economy generally maintains a slow growing population and minimises its trade and relations between the international society. With its production being mainly agrarian products and services, the traditional economy generally is able to self-suffice its sustainability and functionality.
Market Economy
Market Economy is an economy that determines its level of production based on the supply and demand from consumers. Entrepreneurs and firms hold the ability to determine what and how much to allocate goods and services for production and trading, with minimal regulations and interventions from governmental authorities. These economies have generally seen high economic rises with strong inter-economy trade relations. Examples include: USA, Singapore UK etc.
Planned Economy
In contrast to Market economy, planned economy functions with the central government determining the majority of the allocation of goods and resources. Private industries are minimised whilst the government owns and controls most factors of production with a predetermined amount. This ideology aims to maintain socio-economic equality between all individuals and is often associated with communist ideologies. Centrally planned economy is notoriously known by the adoption from the USSR. As a result, the planned economy’s level of trade does not adapt with the supply and demand of global trade which minimises its competitiveness internationally, unless the economy specialises in a particular resource with no substitute.
Mixed Economy
Mixed economy shows a combination between both market economy and planned centrally where there is a blend between government and private enterprises in determining the allocations of goods and services. This is widely adopted by a majority of countries with strong market forces. Notably, mixed economies minimise the severe income disparity from monopolistic dominance by implementing government-enforced goods and resources such as public health care and education, thus reinforcing a richer and orientated societal welfare.
Common examples include: Japan, Canada, Germany etc.
Reference list
Amadeo, K. (2022). What Is a Traditional Economy? [online] The Balance. Available at: https://www.thebalancemoney.com/traditional-economy-definition-examples-pros-cons-3305587.
Imed Bouchrika (2022). 4 Types of Economic Systems in 2025: Which is Used by the World’s Biggest Economies? [online] Research.com. Available at: https://research.com/education/types-of-economic-systems#1 [Accessed 30 Jan. 2025].
Kenton, W. (2024). Economy: What It is, Types of Economies, Economic Indicators. [online] Investopedia. Available at: https://www.investopedia.com/terms/e/economy.asp.
Comments