Components
There are multiple components to economic systems. Decision-making structures of an economy determine the use of economic inputs (the means of production), distribution of output, the level of centralization in decision-making, and who makes these decisions. Decisions might be carried out by industrial councils, by a government agency, or by private owners. Some aspects of these structures include:
- Coordination mechanism: How information is obtained and used to coordinate economic activity. The two dominant forms of coordination include planning and the market; planning can be either centralized or de-centralized, and the two mechanisms are not mutually exclusive.
- Productive property rights: This refers to ownership (rights to the proceeds of output generated) and control over the use of the means of production. They may be owned privately, by the state, by those who use it, or held in common by society.
- Incentive system: A mechanism for inducing certain economic agents to engage in productive activity; it can be based on either material reward (compensation) or moral reward (social prestige).
Read more about this topic: Economic System
Famous quotes containing the word components:
“Hence, a generative grammar must be a system of rules that can iterate to generate an indefinitely large number of structures. This system of rules can be analyzed into the three major components of a generative grammar: the syntactic, phonological, and semantic components.”
—Noam Chomsky (b. 1928)