Economic system

The functions of an economic system may defined as follows:

a) to match supply to the effective demand for goods and services in an efficient manner:

b) to determine what goods and services are to be produced, and in what quantities:

c) to distribute scarce resources among the industries producing goods and services:

d) to distribute the products of industry among members of the community:

e) to provide for maintenance and expansion of fixed capital investment:

f) to fully utilize the resources of society.

Depending on how decisions are made and how the above functions are fulfilled economic systems can be singled out. Many countries like Britain, Sweden, and France operate a mixed system (mixed economy) splitting the economy into public and private sectors.

In Britain, for example, about two-thirds of the economy and about five-sixth of commerce is conducted by private firms. The remainder of the activities of the economy are conducted by socially-owned enterprises. Some, like the Army, Navy, and Air Force, are clearly the sort of institutions that the state itself should control. Others have tended to be performed by the state because they are non-profit making, and as such are unlikely to be attractive to businessmen. Such activities as education and medical care are best operated as socially provided amenities for the benefit of all citizens.

Transport is another natural monopoly. It would be uneconomic to run two railway lines from one place to another, or two different sets of half-empty buses along a country road.

These natural monopolies have, for economic, political, or social reasons, come to be run in the United Kingdom by nationalized institutions, or the municipal authorities, who provide the services required at reasonable prices.