THE ECONOMIC INSTITUTIONS & NON-STATE INSTITUTIONS

Lesson 6

Introduction

The topic for this lesson is about economic institutions and non-state institutions and the
importance that they have on individuals and the society as a whole.

Objectives

At the end of this lesson, you should be able to:

1. Analyze economic and non-state institutions and its impact on the lives of people in society;

2. Identify the role of these institutions to society;

3. Recognize the forms of economic transactions such as sharing, gift exchange, and
redistribution in his/her own society;

Topic Outline
1. Economic Institutions
A. Reciprocity
B. Trade
C. Redistribution
D. Market Transactions
E. Market and State

2. Non-state Institutions

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 Try this!

Directions: Fill the table with information regarding your family’s daily expenses on basic
commodities and utilities.

Expenses/Expenditure Amount (Estimate)

Bills 500
Rental 150
Allowance 200
Foods 400

Questions:

1. What expenditure is allocated the biggest amount? Why?

- Bills would be the highest since the, lights, water, and internet is under there.

2. Who in the family decides what expenses to prioritize? Why?

- That would be my older sister, since she is the one who is paying the bills and everything

3. Is it important to have a budget of expenses? Why

- Yes, to know how much money you need to survive in a day

4. What similarities does a household/family and a country/government have in terms of

spending? Explain.

- The household analogy is simple: the government needs to live within its

means. Like a typical household, if the government consistently spends more
than it receives in income, the nation's debt will ultimately become unsustainable,
and the country will go broke.

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 Think ahead!

Directions: Write the definition of the following terms:

1. Reciprocity
- the practice of exchanging things with others for mutual benefit, especially privileges
granted by one country or organization to another.

2. Trade
- Trade involves the transfer of goods and services from one person or entity to another,
often in exchange for money. Economists refer to a system or network that allows trade as a
market. 

3. Redistribution
- Redistribution of income and wealth is the transfer of income and wealth from some individuals to
others through a social mechanism such as taxation, welfare, public services, land reform, monetary
policies, confiscation, divorce or tort law.
4. Market Transactions
- may involve goods, services, information, currency, or any combination of these
that pass from one party to another. In short, markets are arenas in which buyers
and sellers can gather and interact. Two parties are generally needed to make a trade.
example of a closed-market transaction is when an employee receives, as part of
their compensation, employee stock options 

5. Market and State

- The market is, therefore, the organisation to coordinate people's activities in
seeking self-interest towards increasing social and economic welfare. In contrast,
the state is an organisation for monopolizing its coercive power.

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 Read and Ponder

Economic Activity is an important part of life because it influences the size and complexity of
society and the character of its cultural and social life. The change in how resources and services
are extracted, produced, distributed and consumed can affect in a very significant way how a
society functions. In addition, the sociology of occupation is central to all economic institutions
because jobs/work is the significant source of individual and social identity. A person’s
job/career is the basis for his social status and roles (Santarita & Madrid, 2016).

Reciprocity is defined as the transaction between two socially equally parties concerning goods
or services that are estimated to be of equal value (Santarita & Madrid, 2016). Said transactions
signify social ties of being created or strengthened by the gesture of gift giving (Haviland, Prins,
Walrath, & McBride, 2016). Example, marriage between rich families is not only because of
equal stature of said families in terms of wealth but also it is establishing ties between business
partners.

Three Types of Reciprocity

1. Generalized Reciprocity is done by people who are closely related and is a gesture that
shows personal relationships rather than economic transactions (Kottak, 2011). Children
fulfilling their parent’s wishes to earn a college degree is an example of this type of
reciprocity.

2. Balanced Reciprocity is a transaction between two distantly related people wherein the
giver expects something in return from the recipient, although it does not have to be done
immediately (Santarita & Madrid, 2016). Company/Corporation who place their logo on
the jersey/uniform of NBA or Football Leagues is an example of this type. The company
who have their logo on the uniform gets publicity and advertisement of their business
while the team receives something from the company.

3. Negative Reciprocity is undertaken with people who are not part of the group. It is based
on distrust since there is no personal relationship between both parties. In this type,
people try to profit as much as possible and pay the least amount as possible. It is also a
possibility that deceitful means are used to gain profit (Kottak, 2011).

Trade is the transaction between two or more people where there is an exchange of food,
clothing, jewelry, animals or money for something else of equal value. The value of the trade
goods can be fixed based on previous agreements or can be negotiated during the time of trading.

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Redistribution all the products from the community is sent to the center where it is stored,
counted and later distributed back to the people. In most cases the chief of the village is in-
charge of the process and gets to decide what to do with the surplus (Haviland, Prins, Walrath, &
McBride, 2016).

Market Exchange refers to the organizational process of buying and selling at money price.
Goods and services are bought and sold using money with profit maximization as the goal. The
value of the products and services are determined by the law of demand and supply. Through
bargaining, both buyers and sellers will try to get their money’s worth (Kottak, 2011).

Economy is the “social institution that organizes a society’s production, distribution, and
consumption of goods and services” (Macionis 2012: 370). Goods are tangible objects that are
needed for survival (e.g. food, clothing and shelter) or desired (e.g. jewelry, designer clothes and
bags). Services are intangible activities that people are willing to pay for (e.g. barber, parlor, air
fare) (Kendall, 2016).

The economy has three sectors (Macionis, 2017).

The primary sector/pre-industrial economies relies on raw materials from the natural
environment. It is the most important sector in low-income nations. Examples are agriculture,
fishing, and mining.

The secondary sector/industrial economies is the manufacturing sector which transforms raw
materials into manufactured goods. This sector has a significant share of the economy in low-,
middle-, and high-income nations. Examples are automobile and clothing manufacturing.

The tertiary sector/post industrial economies produces services rather than goods. It is the
dominant sector in low-, middle, and high-income countries. Examples are call center services,
sales, and teaching.

Economic Systems

1. Capitalism an economic system characterized by private ownership of all the means of

production where profit can be derived through market competition and without government
intervention. It has the following features: A) means of production are privately owned; B) profit
motive; C) competition; and D) lack of government intervention (Kendall, 2016).

2. Mixed Economy combines elements of a market (capitalism) with elements of command

(socialism) economies. Great Britain and France have mixed economies that are also referred to
as democratic socialism – an economy and political system that combines private ownership of
some of the means of production, governmental distribution of some essential goods, services
and free election (Kendall, 2016).

Non-state actors are organizations, groups, or networks that participate in international relations
and global governance. They are deemed to have sufficient power and influence to advocate for
and cause changes in international norms and development practices. They include civil society,
nongovernmental organizations (NGOs) and international NGOs (INGOs), economic and social
groups, including trade union organizations and transnational corporations, and the private
sector. In practice, non-state actors include, among others, community-based organizations,
human rights association, universities and research institutes, and chambers of commerce.

Civil society is “the population of groups formed for collective purpose primarily outside of the
State and marketplace” (van Rooy 1998: 30).

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 See if you can do this!

Activity 1 Quiz
Directions: Read each item carefully and provide the best answer. Write your answer on the
allocated space after each item.

1A Enumeration
1 – 3: Types of Reciprocity
- Generalized Reciprocity. Balanced Reciprocity. Negative Reciprocity.
4 – 6: Sectors of the economy
- Sectors of Economy: Primary, Secondary, Tertiary, Quaternary and Quinary.
7 – 8: Economic System
- An economic system is a means by which societies or governments organize
and distribute available resources, services, and goods across a
geographic region or country.
9 – 12: Characteristics of Capitalism
- Capitalism has many unique features, some of which include a two-class system,
private ownership, a profit motive, minimal government intervention, and
competition .

2A Essay
What is the difference between capitalism and mixed economy? Explain. (20 pts.)

- Pure capitalism is a free, private economic system that allows voluntary

and competing private individuals to plan, produce, and trade without
government interference.
- A mixed economic system is an economy that allows private property
ownership, but there is some government involvement.
- In a mixed economy, governments can intervene through regulation if
it's deemed in the best interest of everyone.
- Mixed economic systems are not state-owned economies, meaning the
government doesn't own all of the means of production.

Mixed economic systems are not state-owned economies, meaning the

government doesn't own all of the means of production. In contrast,
pure capitalism is a free, private economic system that allows voluntary
and competing private individuals to plan, produce, and trade without
coercive public interference.

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Capitalism is an economic system wherein private companies and individuals
own property and capital goods. The fundamental basis of capitalism is that
the market (or the forces influencing the market) determines prices and
production in the economy.

In other words, the amount produced as well as the prices of goods and
services are determined primarily by the supply and demand for those goods
and services. As a result, capitalism is often referred to as a market
economy, which is in stark contrast to a centrally planned economy by a
government or command economy.

Pure capitalism—an extreme form of capitalism—is also known as laissez-

faire capitalism. In pure capitalism, private property rights and freedom of
contract are the dominant frameworks of production and trade. The laissez-
faire economy evolves out of a system of respected private property rights.

Activity 2 Powerpoint Presentation

Directions: Choose a topic from Lesson 6 and prepare a Powerpoint Presentation.

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