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
- 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
- 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.
- His work, On the Economic Theory of Socialism.
- Coined the term “Market Socialism”
- Adopted capitalistic principles in socialism.
- Indian economist who was awarded Nobel Prize in 1998 for his contribution to welfare economics.