Sculpture by Karl Marx (foreground) and Friedrich Engels, who popularized communism.
The main types of economic systems are the market economy, the planned economy, the mixed economy and the traditional economy. There are also secondary economic systems that play a role in some situations. However, while an economic system may claim to be part of a new pattern of thinking, it more closely follows one of the aforementioned primary systems.
A market economic system is a system that does not have central planning by the government. Products are bought and sold by individuals who have a direct interest in the transaction, either as a supplier or a consumer. Pricing is determined by supply and demand for a particular product and will normally not go beyond a few accepted parameters. When this happens, it usually comes back into balance. The market economy is often called capitalism.
The opposite of a market economic system is a planned economic system. In this type of economy, the government or some other centralized body, usually closely linked to the government, makes decisions about production and consumption to some extent. Those who govern a planned economy can also set prices and manage the economy until such time as goods and services can be produced or offered for sale. Communism and socialism are common types of planned economies.
A mixed economic system encompasses features of many different economies, most commonly market and planned economies, to arrive at a solution that works for everyone. In most cases, countries employ a mixed economic model. While some may tend to be more market oriented and others more planned, some feel that some regulation is needed, but also some freedom for suppliers and consumers to have some flexibility.
The other type of economic system that can be employed in some parts of the world is known as traditional economics. In this economy, producers are often also consumers. These producers usually earn enough for themselves and their families. In case of surplus, goods and services can be exchanged with third parties. This is a very primitive type of economy and not in use in any industrialized nation – at least not on a large scale.
Other types of economic systems include the participatory system, the information system, and even the virtual system. While it may be difficult to build an entire country or a system of buying and selling goods in this type of economy, they can still play an important role. In fact, these types of systems are responsible for producing billions of dollars in economic activities each year.