Table 8-1: Comparison of Economic Systems |
|
|
Capitalist Economy |
Socialist Economy |
Communist Economy |
Mixed Economy |
|
Health Care |
Prices are set by the market; private firms provide
insurance to those who pay premiums. |
Prices are set by government; individuals pay higher
taxes in return for government-funded insurance/health care. |
The people set prices and hospitals are owned by the
people, so there is no need for insurance. |
There is some combination of private control and
ownership with government regulation and low-income health insurance. |
|
Taxes |
Taxes are low because the government and its functions
are minimal (limited to providing public goods such as national defense). |
Taxes are high because government and its functions are
much more significant. |
Everything produced or earned by every individual is
owned collectively by everyone. |
Taxes are moderate, because the government is larger
than in a capitalist economy, but not as large as in a socialist economy. |
|
Research and Development |
New ideas, products, and businesses are developed and
funded with private money. |
New ideas, products, and businesses are developed in a
coordinated way by government controlled businesses. |
New ideas and products are developed as individuals work
together collectively — there are no businesses. |
New ideas, products, and businesses are primarily
developed privately, but government provides funding strategically in
important areas. |
|
Education |
Private individuals or firms provide education to those
who pay fees or tuition. |
Education is provided by the government with money
collected through taxes. |
Much like health care, schools are owned by society, and
teachers work for society. |
Education is provided both by government and by private
firms, but most pre-college education is usually funded by government. |
|
Distribution of Income and
Wealth |
The market distributes wealth according to individual
hard work, fortune, and the value he or she adds to the market. |
The government collects taxes and redistributes income
and wealth to spread it more equally across society, attempting to provide
something of an "equal finish" for participants in the marketplace. |
All income and wealth is owned collectively by society. |
While income and wealth are
primarily distributed by the market, the government engages in some
redistribution of wealth from the rich to the poor and seeks to provide
people with an "equal start" in the marketplace. |
Thinking about these differences between various economic systems can help
you evaluate the strengths and weaknesses of each system. In capitalist systems,
there is high motivation and high reward for innovation, creativity, and the
creation of wealth. In socialist and communist societies, there is less
motivation and reward for the pursuit of economic self-interest, but there is
more equality. However, socialist and communist economies often lack the
inventiveness and energy that make capitalist economies vibrant. Mixed economies
seek to bring together the best of both kinds of systems while avoiding the
drawbacks of each. As you review the above table, you should recognize that the
United States economy is most accurately described in the “mixed†column.
In objective 6 of this lesson, you will read about how the public, or
governmental, sector interacts with the private sector in mixed economies.
