Economic Systems
Although economists identify just two major economic systems, market and command, in reality, most economies fall somewhere in between the two. Some economies lean more toward a market system while some lean more toward a command system. Economic Systems Video and Quiz, at EconEdLink.
Capitalism, from the Concise Encyclopedia of Economics
Capitalism, a term of disparagement coined by socialists in the midnineteenth century, is a misnomer for “economic individualism,” which Adam Smith earlier called “the obvious and simple system of natural liberty.” Economic individualism’s basic premise is that the pursuit of self-interest and the right to own private property are morally defensible and legally legitimate. Its major corollary is that the state exists to protect individual rights. Subject to certain restrictions, individuals (alone or with others) are free to decide where to invest, what to produce or sell, and what prices to charge, and there is no natural limit to the range of their efforts in terms of assets, sales and profits, or the number of customers, employees, and investors, or whether they operate in local, regional, national, or international markets….
Socialism, from the Concise Encyclopedia of Economics
Socialism—defined as a centrally planned economy in which the government controls all means of production—was the tragic failure of the twentieth century. Born of a commitment to remedy the economic and moral defects of capitalism, it has far surpassed capitalism in both economic malfunction and moral cruelty. Yet the idea and the ideal of socialism linger on. Whether socialism in some form will eventually return as a major organizing force in human affairs is unknown, but no one can accurately appraise its prospects who has not taken into account the dramatic story of its rise and fall….
Free Market, from the Concise Encyclopedia of Economics
Free market is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services….
Marxism, from the Concise Encyclopedia of Economics
The labor theory of value is a major pillar of traditional Marxian economics, which is evident in Marx’s masterpiece, Capital (1867). Its basic claim is simple: the value of a commodity can be objectively measured by the average amount of labor hours that are required to produce that commodity….
Fascism, from the Concise Encyclopedia of Economics
In economics, fascism was seen as a third way between laissez-faire capitalism and communism. Fascist thought acknowledged the roles of private property and the profit motive as legitimate incentives for productivity—provided that they did not conflict with the interests of the state….
In the News and Examples
What would life be like in the North Korean economy? How would things be different in the economy of Chad? In this lesson, you will have the opportunity to compare these two economies to the U.S. economy, and you’ll practice using some tools that can help you to study any economy in the world. Comparative Economic Systems Lesson, at EconEdLink.

Economics in democracy: Bryan Caplan on the Myth of the Rational Voter. EconTalk podcast episode, June 25, 2007.
Bryan Caplan, of George Mason University and blogger at EconLog, talks about his book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies. Caplan argues that democracies work well in giving voters what they want but unfortunately, what voters want isn’t particularly wise, especially when it comes to economic policy. He outlines a series of systematic biases we often have on economic topics and explains why we have little or no incentive to improve our understanding of the world and vote wisely. So, it’s not special interests that are messing things up but the very incentives that lie at the heart of a vote-based system….