Project on economic systems

Submitted from : Ananta raj Khanal

Submitted to : Pushkar Shrestha
CAPITAL ECONOMY
Definition:
Capital economy is an economic system
where the means of production are
privately owned and operated for profit.
It is also called capitalism, free-market
economy, or laissez-faire economy. In
this system, individuals and businesses
are free to own property, invest their
capital, and engage in voluntary
exchange of goods and services in the
marketplace
Example:
 New Zealand.
 Australia.
 Canada.
 Switzerland.
 United Kingdom
Characteristics

- Private ownership of means of

production: In a capital economy,
private individuals or businesses
own the means of production
such as factories, land, and
resources. They are free to use
these resources to produce
goods and services for sale in
the market.

- Profit motive: Businesses in a

capital economy are driven by
the desire to make a profit. The
goal of the business owners is to
 maximize their profits by
producing goods and services
that are in demand in the market.

- Competition: In a capital
economy, businesses are free to
compete with each other to sell
their products and services. This
competition is an important
mechanism that drives
innovation and efficiency.
- Consumer sovereignty: In a
capital economy, consumers
have the power to decide which
goods and services they want to
buy. This means that businesses
must cater to the demands of the
consumers to succeed in the
market.
- Market-based pricing: Prices of
goods and services are
determined by market forces
such as supply and demand. In a
capital economy, prices fluctuate
depending on the demand for the
product or service.

Limited government intervention:

In a capital economy, the role of
the government is limited to
creating a stable and predictable
environment for businesses to
operate. The government may
regulate certain industries and
provide some basic infrastructure
and services, but it generally
allows the market to operate
freely.

- Free enterprise: In a capital

economy, individuals are free to
start businesses and engage in
economic activities without
interference from the
government.
- Innovation and creativity: Capital
economies are known for
promoting innovation and
creativity as businesses compete
to develop new and better
products and services.
Advantages:
- Economic efficiency
- Innovation and technological
progress
- Consumer sovereignty
- Higher standard of living
- Economic freedom
- Entrepreneurship and business
opportunities
Disadvantages:
- Income inequality
- Market failures
- Environmental degradation
- Lack of social safety nets
- Monopolies and oligopolies
- Boom and bust cycles
Conclusion:
Capital economy is a widely practiced
economic system in the world, but it has
its advantages and disadvantages. While
it promotes economic growth,
innovation, and entrepreneurship, it can
also lead to income inequality, market
failures, and environmental degradation.
Therefore, policymakers should aim to
strike a balance between market
freedom and government intervention
to achieve sustainable economic
development and social welfare.
SOCIAL ECONOMY
Definition:
Social economy is an economic system
that prioritizes social and environmental
objectives over profit maximization. It is
also called social entrepreneurship,
solidarity economy, or community-based
economy. In this system, economic
activities are carried out by organizations
and enterprises that are owned and
managed by communities, workers,
consumers, or volunteers.
Examples:
Co-operatives
Social enterprises
Community development corporations
Credit unions
Characteristics
- Collective ownership and
governance: In a social economy,
organizations and enterprises are
owned and governed by
communities, workers, consumers,
or volunteers, rather than by
 individual investors seeking to
maximize profits.

- Social and environmental mission:

Social economy organizations and
enterprises prioritize social and
environmental objectives over
profit maximization. They aim to
achieve a positive impact on society
and the environment while
generating income to sustain their
operations.

- Democratization of decision-
making: Social economy enterprises
and organizations operate on
democratic principles, where
 decision-making is shared among
members and stakeholders, rather
than being controlled by a single
owner or manager.

- Non-profit orientation: Social

economy enterprises and
organizations are usually non-profit
or have limited profit margins. Any
surplus generated is reinvested in
the organization's social or
environmental mission.

- Collaboration and cooperation:

Social economy organizations and
enterprises often collaborate and
 cooperate with other stakeholders,
such as local governments, NGOs,
and other social economy
organizations, to achieve their
social and environmental
objectives.

Advantages:

- Social and environmental impact

- Community empowerment and
ownership
- Employment creation and local
development
 - Resilience and sustainability
- Innovation and creativity
- Alternative to mainstream
capitalism
Disadvantages:
- Limited scale and scope
- Financial sustainability challenges
- Lack of access to capital and
resources
- Dependency on external funding
- Difficulties in measuring social and
environmental impact

Conclusion:
Social economy is an alternative
economic system that seeks to
promote social and environmental
well-being alongside economic
development. While it faces
challenges such as financial
sustainability and limited scale, it
also offers advantages such as
community ownership and
empowerment, social and
environmental impact, and
innovation. Therefore, policymakers
should support the growth and
development of social economy
enterprises and organizations to
achieve sustainable and inclusive
economic development.
Mixed economy
Definition:
A mixed economy is an economic
system that combines elements of
both capitalism and socialism. In a
mixed economy, some industries
and resources are owned and
managed by the government, while
others are owned and managed by
private individuals or businesses.
 The government plays a significant
role in regulating and influencing
the economy, but private enterprise
is also allowed to operate freely.

Characteristics
- Coexistence of public and private
ownership and control of resources:
In a mixed economy, some
industries and resources are owned
and managed by the government,
while others are owned and
managed by private individuals or
businesses.

- Government intervention and

regulation: The government plays a
 significant role in regulating and
influencing the economy, including
setting policies on taxation, trade,
and labor.

- Market-based pricing and allocation

of resources: In a mixed economy,
the market determines the prices
and allocation of resources for most
goods and services, but the
government may intervene in some
cases, such as providing subsidies or
implementing price controls.

- Social safety nets and welfare

programs: A mixed economy often
includes programs to provide social
 safety nets, such as unemployment
benefits, healthcare, and education.

- Incentives for entrepreneurship and

innovation: A mixed economy
encourages entrepreneurship and
innovation by providing incentives
such as tax breaks, subsidies, and
funding for research and
development.

- Trade and global economic

integration: A mixed economy is
typically open to trade and global
economic integration, allowing for
the exchange of goods and services
across borders.
 Advantages:

- Balancing economic growth and

social welfare
- Promoting competition and
innovation
- Addressing market failures and
inequality
- Providing social safety nets and
welfare programs
- Fostering economic stability and
predictability
Disadvantages:
- Tendency towards bureaucracy and
inefficiency
- Risk of government corruption and
favoritism
- Incomplete information and
imperfect markets
- Conflicting interests and priorities
Difficulty in achieving an optimal
balance between public and private
sectors