SYSTEMS OF ALLOCATION

Economic System
o It organizes its citizens in productive
activities for the compensation of
resources and distribution of goods
within the society
o Provides the society a framework
through which it can maximize the use
of its resources
o It ensures efficient production and
distribution of goods and services
o Helps societies solve scarcity
o Many societies have unique ways of
allotting resources
PROTOTYPES OF THE ECONOMIC
SYSTEM
o Traditional System
- Oldest type
- Conducts
economic
activities
according to practices handed
down from ancestors
- Adults are the authority; youth
follows
- People live simple lives
- Main economic goal: to be selfsufficient
- They plant their own crops, cook
their own food, build their own
house and cure illnesses
- Advantages:
Self-sufficient
Simple lifestyle
Stress-free decision making
- Disadvantages:
No innovation
Stagnant and boring
o Command System
- Operates like an army
- Powerful
authority
manages
everything (assumes that leaders
know everything that the economy
needs)
- Citizens are required to render
compulsory services for the State
- Assures that all citizens have equal
access to goods and services (no
discrimination)
- People depend on the state
- Advantages:
Equal distribution of wealth

Sense of nationalism
Fast decision-making
- Disadvantages:
No private sectors can initiate
innovation
No freedom of enterprise and
choice
Limited choices of products to
buy
o Market System (exact opposite of
command)
- Economic activities are organized
- Provides
info
that
influences
economic decisions concerning
production and distribution
- Individuals can make decisions by
themselves
- Profit-incentive
motivates
businesses to produce high quality
goods (innovation)
- Advantages:
Freedom of enterprise and
choice
More products to choose from
Quality products are affordable
- Disadvantages:
Unequal distribution of wealth
Possible abuse of freedom
POLITICAL-ECONOMIC THEORIES IN
MODERN ERA
o Capitalism (laissez-faire)
- Society based on private ownership
of
resources and means of
production
- Free economy
- Government has no role; they only
need to maintain national security
and order
- Freedom of enterprise
Creates intense competition
among businesses
Businesses
will
constantly
innovate products
Cant manipulate supply and
prices of commodities
- Price System
Businesses will produce goods
that consumers will buy
High demand = high supply
- Profit Motive
Capitalists aim for high profit
Goal is to outdo competitors

Ensures maximum output at

lower cost of production
- Consumer Power
Business survive because of
consumers
Consumers practically control
the market
- Advantages:
Innovation of products
Active markets
Freedom of choice and private
ownership
- Disadvantages:
Intense
competition
of
businesses
Businesses cant manipulate
supply and prices
Unfair to the poor
Socialism
- Socialists think that capitalism is
unfair
- Workers are protected if economic
wealth is equally distributed if state
owns means of production
- State makes all economic decisions
- Utopia = perfect society; everyone
must work
- Two main forms:
Reform
socialism:
gradual
transformation of economy from
capitalism to state ownership of
means of production; attained
thru education of people
Revolutionary socialism: violent
overthrow of capitalism system;
class
struggle
between
proletariat and capitalists
- Advantages:
People are equal
Rendering service to the state;
sense of nationalism
Everyone works according to
their abilities
- Disadvantages:
No freedom of choice and
private ownership
Communism
- Advocates state ownership of most
resources and means of production

Establishes totalitarian state that

controls aspects of life of the
people
- Advantages:
Equality among people
- Disadvantages:
All aspects of life are controlled
No freedom
People would be sacrificed to
protect rights and welfare of
state
Fascism
- Major pol-economic system
- First leader to use it: Benito
Mussolini
- Establishes
authoritarian
government
- Deprives people of liberties
- Does not aim to overthrow
socialism
- Government
uses
police
and
military force to overthrow people
distracting the goals of the state
- Advantages:
Sense of nationalism (every
person must be proud of his or
her race)
Nationalism is the supreme
value
- Disadvantages:
No liberty or freedom
Anyone who stands in the way
of the government will be
eliminated

COMPARE AND CONTRAST

A. CAPITALISM AND SOCIALISM
Capitalism
o Society
based
on
private
ownership of resources and
means
of
production
(NO
EQUALITY)
o Government has no role; they
only need to maintain national
security and order
Socialism
o Workers
are
protected
if
economic wealth is equally
distributed if state owns means
of production
o State makes all economic
decisions

BOTH
B. COMMUNISM AND FASCISM
Communism
o Aims to overthrow capitalism
o Advocates State ownership of
most resources and means of
production
Fascism
o Does not aim to overthrow
capitalism
o Forges political alliance with
capitalists so that industries will
operate towards the attainment
of economic or political goals
BOTH
o No
freedom:
communism
establishes totalitarian state
and
fascism
establishes
authoritarian state
o People are being abused
C. CAPITALISM AND COMMUNISM
Capitalism
o Society
based
on
private
ownership of resources and
means of production
o Government has no role; they
only need to maintain national
security and order
Communism
o Advocates state ownership of
most resources and means of
production
o Establishes totalitarian state
that controls aspects of life of
the people
BOTH
o Both ensures national security
and order
D. SOCIALISM AND COMMUNISM
Socialism
o The lives of the people are not
being controlled
o Religion, jobs, & marriage are
up to the individual; Compulsory
education; Free, equal access to
healthcare
&
education
provided through a socialized
system funded by taxation
Communism

o
o

All aspects of life are being

controlled
Either the collective "vote" or
the
state's
rulers
make
economic and political decisions
for everyone else

BOTH
o People are protected by the
state
o There is no freedom, but there
is equality
o Rendering
service
to
the
government

E. CAPITALISM AND FASCISM

Capitalism
o Freedom to choose; freedom of
private ownership
o Government uses police and
military powers to maintain
peace and order
Fascism
o Deprives
people
of
their
liberties;
establishes
authoritarian government
o Government uses police and
military powers of the State to
enforce policies or eliminate
people who stand in the way of
the government
BOTH
o Have a political alliance to
ensure that industries operate
towards the attainment of
economic and political goals
F. SOCIALISM AND FASCISM
Socialism
o Does not want workers to be
exploited; it wants the workers
to be protected and treated
fairly
o Wants to overthrow capitalism;
capitalism is considered as
unfair
Fascism
o Anyone who stands in the way
of the government will be
eliminated

o
BOTH

Does not
capitalism

aim

to

overthrow

State plays a major role of the

ownership of the means of
production