One of the biggest political debates is about "the best type of economic system". From what I have seen, this is usually a contrast between just two options: capitalism and socialism.

I think these are not the only two kinds of economic systems out there. What typologies or categorization of economic systems exist?

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    I don't know about Too Broad, but this seems to have little to do with Politics. There is an Economics.SE where this would be a mainstream question. – Brythan Mar 6 '17 at 3:23
  • Yeah, it was kind of hard to figure out which forum to post in. I figured socialism can be an economic policy and a type of government at the same time, and capitalism vs socialism is one of the most prominent political arguments. I'll try the other forum, though. – David Blomstrom Mar 6 '17 at 3:45
  • I believe this is on topic. This is a good question related to political economy, which is part of politics as well as economics. – xuq01 Mar 6 '17 at 12:05
  • I'm unsure if it's ontopic, but as phrased, it's also too subjective/broad. – user4012 Mar 6 '17 at 16:57
  • This could be a good fit for Econ, but I think that kinds of economic systems are also highly important to political theory. I edited and tagged as political-theory. Hope to see it opened. – indigochild Mar 7 '17 at 3:47

From a Marxist point of view, an economic system is defined by its mode of production, which is in turn the combination of productive forces and relations of production. Productive forces are, in the words of a Smithian economist, just the labor, land and capital used for production.

What is more important here are the relations of production. The relations of production are the sum of the social relations that define ownership and distribution, often codified in law: for example, the slave owner's proprietary ownership of slaves, the feudal lord's relationship with his fiefs and serfs, and the capitalist's private ownership of the capital used for production. Marx proposed that, over human history, the development of productive forces creates a strain on the existing relations of production, and the conflict between them causes the relations of production and thus the mode of production to evolve.

Marx described a few modes of production, i.e. economic systems, that existed in human history in his Critique of Political Economy and Das Kapital:

  • Primitive communism. In a primitive communist economic system, production is so low that no permanent surplus product, i.e. production beyond what is required to sustain everyone, is produced. Consequentially, there is no concept of ownership in this a primitive communist economy, because there is nothing over which it is possible to contend ownership. Because of the lack of any private property, there are no classes in a primitive communist society.
  • Ancient mode of production, aka slave society. When forces of production develop such that some permanent surplus is produced, people will naturally begin to contest for this surplus. People then realize that directly controlling the laborers who are in turn able to produce surplus is the most effective way, because at this level of development human labor is the determining force of production. Thus, a class of slave owners begin to directly control a class of slaves, who in turn produce surplus for the slave owners.
  • Feudalism. When forces of production further develop, arable land will become more significant. Feudalism, therefore, is such a system that allows effective control of arable land. In a feudal economy, feudal lords control serfs contingent upon land. The serfs work on the land and give all the surplus to their lord, in return for what is necessary for a living, protection, etc.
  • Capitalism. With the rise of skilled & waged labor, development of division of labor and manufactories, capital will become the foremost important resource in production. Thus, in a capitalist economy, private property, i.e. private ownership and control of capital essential for production. A class of capital owners, better known as the bourgeoisie, employ workers, or proletarians. The bourgeoisie owns the capital and thus controls all the surplus, and the proletarians are given a monetary wage for their work. This is the economic system that best characterizes most of the world at the current stage.

The rest of the modes of production are, by far, just theory:

  • Socialism. Marx predicted that capitalism will have its problems. The mass accumulation of capital will become less profitable due to the law of falling returns. Moreover, the development of capitalism will create an ever-growing class of proletarians, who find their life to be more difficult than ever. Eventually, the class of bourgeoisie is overthrown, and all producers direct their production according to need and distribute their production by contribution. There haven't yet been a fully socialist economy in human history yet, but we are seeing modes of production that approach socialism, often with the intervention of a government. Examples include:

    • central planning, which is the Soviet Union's failed attempt at socialism. The government plans productions according to their perception of society's needs, and controls distribution, in principle according to contribution. We all know why this failed.
    • social democracy, which attempt to incentivize production according to need and make distribution more close to distribution by contribution by utilizing governmental intervention in the economy, such as a graduated income tax, public ownership of corporations, and governmental subsidies, etc.
    • cooperatives, in which a group of people democratically discuss their production and the method to distribute their production, often by contribution.
  • Communism, the ultimate mode of production according to Marx. When production is so efficient and material wealth is so abundant, everyone's needs could be eventually fulfilled. Thus, distribution by need is possible, and everyone could get what they need.

The modes of production aren't discrete. There is always stages "in the middle". Social democracy and cooperative economy, as I mentioned above, are examples of transitional modes of production between capitalism and socialism, and are widespread in the world today.

If you are interested in Marxist theories of modes of production, you could read more about Marx. Diving right into Das Kapital will be difficult, but beginning with shorter works such as The Communist Manifesto and Critique of the Gotha Program, etc.

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One of the biggest political debates is about "the best type of economic system".

the right answer to that question is: it depends.

I think these are not the only two kinds of economic systems out there. What typologies or categorization of economic systems exist?

we often talk about economic systems based on its ownership: individual ownership (capitalism), and public ownership (socialism / communism).

Real economic systems are often somewhere in between: most developed capitalism societies have safety nets (a form of socialism), and most socialism societies allow a varying levels of private ownership and free markets -> NKorea for example, and China before 1980s.

most nations lie along the spectrum of capitalism / socialism / communism.

you will also hear people talking about free markets and planned economies. A planned economy can be temporary (during war times for example), or permanent -> USSR for example. Such a system is necessarily tied to public ownership.

free markets can exist under socialism (not sure about communism as pricing doesn't exist there): publically owned enterprises can determine its capital allocation based on supply and demand.

One way to view "socialism" (as an economic system and putting aside its political implications) is to think of it as a capitalism society where public ownership (via stocks) is wide spread -> socialism here is really a communal ownership.

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The economic and political spectrum is more complicated than that.

it should be considered a N-dimensional graph with small divisions inside that include different points of view.

you gotta take in count the next axis:

  • the macroeconomics-trade (-x protectionism, +x free tade)
  • the macroeconomics-debt (-x no debt policy, +x state debt policy)
  • and many more...
  • the state size (-x full decentralization,+x full centralization)
  • microeconomics-welfare ( -x no welfare, +x welfare state)
  • microeconomics-labour ( -x no investment on labour, +x subsidized industries)
  • and many more...
  • Liberty (-x authoritarian government, +x libertarian government)
  • Economical Equality (-x unregulated equality, +x mandatory equality)
  • Unemployment ( -x no unemployment grants,+x subsidized unemployment)
  • and many more...

Reducing all of this to A vs B instead of looking at the details has no use, there's a hundred types of capitalism, and as many types of socialism, and some parties will say they're socialist but will be capitalist, or vice-versa.

You got to examine in detail their programme and actions, to determine how they act and how they are structured.

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  • The question is asking about how to categorize economies. This doesn't provide an answer. Objects can be categorized (or clustered) in n-dimensions when n=1, just as well as when n>1. – indigochild Mar 8 '17 at 16:05
  • my answer points to the unimportance of labelization of economic and political systems, and to the importance of it's content. from the original answer : "One of the biggest political debates is about "the best type of economic system". From what I have seen, this is usually a contrast between just two options, what other options would be at stake". My answer goes beyong labelization and proposes the OP to reason in a deeper level, which usually is more satisfying and ends in a more satisfactory result – CptEric Mar 9 '17 at 10:47
  • That's a pretty good reason. Any chance you would consider making that part of the lead? It would give the reader an idea why they should be considering all these elements, instead of broad categories. – indigochild Mar 9 '17 at 15:03
  • @CptEri - I upvoted your answer because it does offer a lot to think about. However, I feel like some of your points kind of miss the mark. For example, I see unemployment as a characteristic of a particular ECONOMY, not an "economic system." Similarly, "liberty" is more associated with kinds of government than economic systems. Reducing economics to a simple A-B continuum does seem pretty lame, but I haven't yet found a more refined system that works (for me, at least). – David Blomstrom Mar 16 '17 at 23:28
  • @DavidBlomstrom unemployment is part of an economic system -> you can have unemployment grants, government subsidies to big workforce industries, etc... or you can provide neither of those, or only one, and that would define how your economical system interacts with expenditure on industry. Liberty was an example more related to politics, true, but it's linked to the rights and duties of a citizien, wich have an impact on economy. There are not many authoritarian regimes that are known to be tourist's paradise, right? (maybe cuba, but because it's the caribbean.. heh) – CptEric Mar 17 '17 at 7:16

Here's another quasi-answer: The end of captitalism has begun

I haven't had a chance to digest everything the author says yet, but it reads like a big propaganda piece to me. Nevertheless, it suggests an alternative to capitalism - "postcapitalism" - even if that alternative is theoretical at the moment.

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