The main types of economy
The types of economy are a rather broad topic. These types can be discussed in terms of the criteria that are used to classify them and those that are treated as characteristics. The different criteria for classifying the types of economy are not compared in terms of preference, or that one classification is more accurate than another but depends on our need at any given time.
Classification by market system
In examining issues such as the market, property, and the concept of economic power, we can first distinguish between the following types of systems of economy
Capitalism
The first and most important of the economic types is capitalism, which prevails in most Western countries. The characteristic feature of capitalism (free market) is that it applies the method of private ownership to almost all goods, that a very large part of the available resources in all forms is in this system, and that the laws governing the economy under capitalism are determined by this system.
The market is organized according to the policy of supply and demand, exchanging goods produced by a person at any time of the year for goods produced by him. The United States of America is the largest country that follows this economic model, supports its generalization, and defends its usefulness.
Socialism
The clearest concept of socialism is that it is an economic system in which the state is responsible for intervening in market activity to ensure the supply of basic goods and services.
The policies adopted in this type of economy are analogous to the rigid laws of Marxism and communism, where the State plays not only a supervisory role for regulatory purposes, but also an arbitrary role in imposing laws for the control of all means of production.
This model goes back to the origins of the socialist approach. Socialism is found in Western countries and is largely embedded in the ideology of capitalism, which prevents the state from intervening in the ownership of the people.
Mixed model
A third economic system aims to maintain a free market, but is conditioned by conditions and norms regulating the flow of labor, or by rules imposed by an administrative body with management authority.
Traditional economy
This is the type of economy that exists in less complex societies, in which the role of economic agents is to itself through customary methods determined among themselves by their beliefs and habits.
The traditional economy has the character of a local market of small businesses and groups. It is the same type of economy that was used in the West before the emergence of more complex societies and countries.
The advantage of this type is its lack of complexity in detail and its ease of understanding for the beginner, and it must be recognized that because of its simplicity it is useful only for less complex economic problems.
It also limits economic relations and, consequently, the possibility of reinvesting that money in the improvement of the productive process.
This economic model is currently found in very underdeveloped societies that often need the help of rich and prosperous countries.
Classification by scope
Classification by scope is another way of classifying types of economics and is related to the scope of the sector in question.
Microeconomics
In the context of the global economy, microeconomics plays a special role, as it deals with the behavior of individual actors such as consumers, firms themselves, investors and workers, who develop their own explanatory models.
Once the precise economic analysis has provided data on market goods and their prices, microeconomics studies how these elements are interconnected and how markets are formed.
general economy
Scale classification is used to highlight macroeconomics, which is concerned with studying the behavior of economic agents on a broader scale.
It allows the analysis of a complex economy and the examination of employment data and models of market and industrial product price developments and input prices. The results do not stop there but extend to the balance of payments data of large administrations.
Excellence through evaluation
In order to distinguish between types of economies, there is an objective or subjective view created to analyze different types of economic data, and if one decides to study the types of economies according to a classification system based on valuation, the types of economies are as follows
positive economics
This is the type of economics that objectively reveals economic issues as they are, and in this type, one cannot speak of bad or good results because there are simply no specific value judgments.
However, the figures are determined neutrally, for example, the GDP figure for a particular country may be stated, but not evaluated and judged as to whether it is positive or negative.
The same applies to the unemployment rate, interest rates, growth in a particular sector, investment in any sector, or any other economic data and indicators. This formula is used to make forecasts of the consequences based on the available data and therefore the reports must be unbiased.
regulatory economics
Normative economics is the opposite of positive economics, where the lack of objectivity and the examination of economic data from a personal perspective leads to the possibility of talking about high or low GDP.
Or observational data on expected unemployment in a given year and other specific data containing positive or negative estimates, and the opposite of positive economics, because it does not observe reality as such, but estimates the results.
Normative economics seeks to observe data and organize activities to achieve the desired goal. The problem is that it leaves room for value judgments, which open up the possibility of interference from personal opinions.
As a result, economic indicators are often distorted by political groups with their own agendas and therefore influenced by individual or group views, so that the same economic analysis results in sadness or joy, depending on the individual.
According to the identification criteria
At the academic level, the distinction between the core areas of economics is made according to definition or terminology, and the following types of economics are produced accordingly:
orthodox economics
The traditional model according to this distinction would be orthodox economics. This type is academically disseminated in the study of economics, the criteria of rationality, equilibrium, and individuality being taken into account in this model.
The distinctive feature of this model is that it presents economics as an exact science, so it explains the behavior of actors in the field from a rational point of view, and therefore the results are predictable, so the models developed have the task of providing the possibility of predicting the different behavior of the market.
counterfactual economics
The model of non-traditional economics contradicts orthodox economics, which defines traditional economics as a heteronomy whose main pillars are institutions and history itself, as well as the social structure of planned markets.
It is seen as the opposite of the former, since it is a social and therefore subjective science, according to which economic agents can sometimes act in completely unexpected ways.
However, this does not happen according to personal whims but is constrained by limitations, and it must always be borne in mind that expected outcomes may be unrealistic when agents decide to act in a non-contractual way.
Differentiation between theory and practice
The distinction is made according to the type of application, whether it was only theoretical or practical and applied, as shown below:
theoretical economics
Theoretical economics is used to create different theoretical models to interpret the behavior of markets and economic agents.
Experimental economics
Experimental economics is the testing of different theoretical models to test their effectiveness. The scope of this behavioral method is logically limited because experimentation in a real environment involves many risks when a sensitive factor such as the economy is involved, and risks are always to be expected.
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