Types of economy on the basis of ownership

1. Capitalistic Economy
  • This form of economy stresses on “Laissez Faire” which means non-interference by the Government (or least interference by the Government)
  • The term is given by Adam Smith in his work (Book)  “wealth of nations”
  • Capitalistic economy is also known as Market economy. (Larger Market Interference)
  • There will be No/least role of the state.
  • The decision of price determination & production is taken by the market.
  • Promotes Individual ownership.

2. State Economy
  • All the decisions related to production, supply & price are taken by the state only.
  • State Economy is also known as the centralised economy, Non-Market economy and Non – Planned economy.
  • The Term state Economy is given by Karl Marx.

There are 2 classifications of state economy

(i) Socialist Economy
  • This Types of Economy emphasises on collective ownership of the means of production (Property & assets)
  • Greater role of the state
  • It is Planned Economy
  • Nehru & Gandhi were influenced by this ideology.
  • Eg – USSR 

(ii) Communist Economy
  • Advocates state ownership of the properties including even labour, land etc. and absolute power to state running the economy Eg – China

3. Mixed Economy  
  • In this type of Economy, public & private sector co-exist. It provides enough space for market competition along with government intervention & regulation.
  • Here the state has fixed economic role as well as regulatory functions.
  • This Idea became famous after the Great depression of 1929.
  • It is also called a dual economy.

  • Dual Economy – Indian Economy is a dual economy. Here the Main feature is co-existence of:-
  • (i) Traditional & Modern Industries 
  • (ii) Labour Intensive & capital intensive Industrial sector
  • (iii) Small, cottage & Modern Industries.

Sectors of an Economy
A. Primary sector 
  •  This sector includes all those Economic Activities where there is the direct use of Natural resources.
  • Eg: Agriculture, Forestry, fishing, fuels, Metals, Minerals, Mines etc.
  • In India Agricultural sector is known as primary sector.

B. Secondary sector
  •  This sector is also called Manufacturing sector. It uses the produce of the primary sector as its raw materials.
  • This sector is also known as Industrial sector.
  • Eg: Bread & biscuits, Cakes, Automobiles etc.

C. Tertiary Sector
  • This sector includes all those economic activities where different services are produced such as Education, banking, Insurance, Transportation, Tourism etc.
  • This sector is also known as the service sector.

Economists and their works
A. Classical Economists

Adam smith
  • His work, “wealth of nations” (1776)
  • Promoted capitalist Economy
  • Proposed Invisible hand concept where market forces acts as Invisible hand to bring in equilibrium to the economy

David Ricardo
  • His work, “Principles of Political Economy & Taxation”.
  • He supported Industrial specialization, International trade & comparative Advantage.

  • His work, “An essay on the Principles of Population”.
  • He stated that population Increases in Geometrical progression (G.P) whereas food grains increase in Arithmetic Progression (A.P).

J. S Mill
  • His work, “principles of political economy”.
  • Mill was critical about communism & Socialism. Therefore he came up with Ideal system of political Economy.

B. Contemporary Economists
John Maynard Keynes
  • His work, “General theory of Employment, Interest and money”.
  • Keynes suggested the capitalistic order  Assimilate the goals of the socialistic Economy.

Oscar Lange:
  • His work, On the Economic Theory of Socialism.
  • Coined the term “Market Socialism”
  • Adopted capitalistic principles in socialism.

Amartya Sen:
  • Indian economist who was awarded Nobel Prize in 1998 for his contribution to welfare economics.

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