Choosing an economic system
By RICK CUNNINGHAM
© St. Petersburg Times, published December 7, 2000
Sanna's family still lives in much the same way as his ancestors did. They are foragers, hunter-gatherers who depend upon their knowledge of the land to survive. His small family group lives a semi-nomadic lifestyle, moving about the land in search of food sources.
Sanna's days are spent with his father, Toppie. Toppie is the best game tracker in the group. Sanna watches as his father tracks herds of buffalo. Toppie's father taught him how to track buffalo, just as his father taught him. Sanna will also become an animal tracker. Toppie trades the buffalo meat for things his family needs to survive. The family is dependent upon what Toppie kills and on what they gather.
One time Sanna asked his father if he could become a game warden, drawing a salary from the government to protect the elephants and hippos from illegal poaching. Toppie was not at all happy to hear this. He explained to Sanna that it was his responsibility, and the responsibility of every young San man, to honor his ancestors. "We honor our ancestors," Toppie explained, "by doing the things that they did, living the way they did."
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Pak Hee-Sun lives in North Korea. Hee-Sun is 16 and lives with her family in the capital city of Pyongyang. She and her mother just returned from the clothing store where they went to buy their annual ration of shoes. Unfortunately, there were no shoes to buy. Hee-Sun's mother is very upset, not knowing how she will find shoes for her children to wear during the upcoming winter. She is afraid of having to go to her neighbor, who sells shoes, because his shoes are so expensive.
North Korea strongly believes in the philosophy of Chuch'e, or self-reliance. The government plans the North Korean economy; officials have a fear of outsiders. The North Korean constitution stipulates: "The means of production are owned solely by the state and cooperative organizations." It is the philosophy of the government that everyone should work for the common good. Through cooperation and collectivization, everyone will benefit and share equally in the wealth and produce of the land.
To Hee-Sun this means that she and her family own nothing. The government owns their apartment, their clothes, their furniture and even her ability to work. Hee-Sun is fascinated with medicine and would like to be a doctor. Unfortunately, she will have no say in where she goes to work. She will do the job the government assigns to her. The government will know where she will best benefit society.
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Paul Stevens lives in Jacksonville. His father owns a plumbing contracting business and his mother is a nurse. They live in a house his parents bought just after Paul was born. Paul's father has to have a contractor's certification from the state to run his business. This ensures that he knows how to do his job safely. There is a lot of construction going on in their area, and the builders like the work he does, so Paul's father has plenty of work. Paul's mother also must have a license from the state. She used to work in a hospital, but that was too stressful. Now she works in a doctor's office.
Their family is much better off now than they used to be. Paul's father got hurt on a job last year, and he did not have health insurance because it is so expensive. He was out of work for two months and had to pay off the doctor's bills after he got back to work.
Paul's dad wants him to learn to be a plumber so he can take over the business when he is ready. Paul is not looking forward to this. He wants to go to college and learn to be a computer programmer. Paul loves to fish and figures that if he is writing computer programs, he can live on a lake where he can fish any time he wants.
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Paul, Hee-Sun and Sanna illustrate the three main types of economic systems: traditional, command and market (free enterprise). Can you guess what type of system each lives under?
In choosing an economic system, every society must answer four basic questions:
Traditional economy is one based on self-sufficiency, with barter as the form of trade. People will do things as they have always been done. Traditional economies are organized by status and custom (for example, the king must have the greatest wealth in the society). Traditional societies depend upon personal characteristics for social organization. Those include who you are, your status or your family's status. This determines what job you will do and how you will live.
Command economy is one in which decisions about production, distribution and consumption are made mostly by the government. People do things for the good of all society. Command economies are organized by rules, and those rules are decided upon by a centralized authority. For example, the government decides what goods will be produced and how much will be made. It is impersonal, in that individuals in the society probably don't know the individuals in the government who make the decisions.
Market economy is one in which decisions about production and distribution are made mostly by individuals and companies in the economy. People do things because they see the potential for benefits, such as choosing a job with the salary that allows you to live the lifestyle you want. Companies produce goods based on what they think they can sell. Market economies are organized around free exchange.
In the real world, there is no such thing as a pure market economy, or a pure command economy. Pure traditional economies may have once existed, but in the current world they become rapidly "mixed" on contact with the rest of the world.
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-- Rick Cunningham is project coordinator for the Institute of Business and Entrepreneurship in the Broward County public school system.
About the Florida Council on Economic Education
Money Stuff was developed by the Florida Council on Economic Education and project director Fonda Anderson. The council is a statewide non-profit organization founded in 1975 to educate K-12 teachers and students about the free enterprise system and to instill in them an appreciation for a market economy. For more information on the council's programs for teachers and students, please call (813) 289-8489.
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