The question, “what is the function of an economic system” is not as easy to answer as one might think. Economists tend to use language like “natural order” and “self-interest” to describe the workings of the economic system. However, these concepts are extremely vague and it is sometimes difficult to tell what economists mean when they talk about these concepts. Sometimes it can be even more difficult to know what an economic system actually is. To make matters worse, the meaning of the word “economy” has become so tainted with political propaganda that those who use it as a term are no longer interested in discussing what the real definition of the economic system is.
One thing that all economic systems have in common is that they attempt to allocate resources in the best possible ways. This is usually done through a process of specialization or evolution. In the case of most economic systems, the function of the economy is to create goods and services at a reasonable price for the population that will buy them. In order to do this, prices must be regulated by law and markets must be open to all buyers and sellers. Without the rule of law and open markets, there will be no incentives to make a quality purchase, since it will be considered a luxury.
Of course, markets also serve another purpose in the function of an economic system. They allow for the allocation of resources in the best possible ways so that no resource is wasted. For instance, it is impossible for a market to act as an efficient allocation process if everyone is trying to sell the same products to everyone else. If every product had its own mark up to benefit its owner, then the market would quickly become overcrowded and inefficient.
A good example of the problem facing modern society is found with the economic meltdown we recently experienced. It took place because too many people were trying to take advantage of the financial situation by changing their investment portfolios to take advantage of falling stock prices. This meant that there was an excess of wealth creation, and not enough effort put into creating wealth by creating products and services at a fair market price. We are still recovering from this, because the lessons of the past are not being learned. In fact, the worst thing that could have happened was for us to have continued the trend of too much wealth creation without any counter efforts to reduce the level of total wealth.
Therefore, we need to learn the lessons of our past mistakes and make sure that we never repeat them. For instance, it is quite obvious that a market-based exchange system will not work if we continually print more money to pay off debts. This only exacerbates the problem because it causes the value of the currency to fall to an all time low. Eventually, hyperinflation will occur, which means that the entire economic system will come crumbling down.
Therefore, we need to get back to basics and start building wealth by creating goods and services in the real economy. This way we will be able to increase overall economic performance and avoid the horrible consequences of hyperinflation. We need to return to a point where true economic policies are actually determined by human action. If you are interested in the real economy, then you should visit Vimeo and read more about John Foster's new book, “What is the Economic Function of an Economy? Accelerating a System For Creating Wealth.”
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What is the list of economic systems? This is one question that has preoccupied scholars for many years. The aim of this essay is to explain the answer to this question in as clear a way as possible. In other words, what is it that economists mean when they say that a particular economic ...
“How many economic systems are there?” This is a question asked by many intelligent people who have studied the workings of our economic and monetary system. And they ask this question because they want to know how many ways there are to break the existing systems and create new, more robust and efficient systems. ...