Types of Economic Systems and the Public and Private Sector in the Uk

Introduction

In this report I will explain the different types of economic systems and examine the public and private sector in the UK. I will then discuss the mix of public and private sector organisations in the UK and conclude which system the UK has.

Command (Planned) Economies

This type of economy is completely 100% controlled and purely ran by the government. Within a command economy there are 3 main agents. These are the government, consumers and workers. For a command economy to work these three are assumed to be working together for the common good and not their own self-interest. There is no private property in this type of economy it is entirely government owned. All factors of production apart from labour are owned by the state. However at extremes labour services can be directed into jobs by the government. Command economies will also direct producers as to what they can produce and the amounts they can produce. This determines what good are available to consumers.

Resources are allocated through government planning. This is very complicated and they must decide how much of everything should be produced e.g. how much food or alcohol to produce. They then make decisions on how it is to be made and what factors of production are to be used. They will then decide on the distribution. This will decide what goods and services consumers receive.

Most command economies have 5, 10 or 15 year plans which will plan the economy’s growth over the growth the long term. They also use short term plans which may address yearly economy growth. Most create these plans using input-output analysis, in which they precisely work out what and how much input needs to be put in to achieve a certain amount of output using complex flow charts. Research on command economies [Kimberly Amadeo, 2012, About.com guide] states that ‘The plan is implemented through laws, regulations and directives. Businesses follow production and hiring targets instead of individually and freely responding to the laws of supply and demand’.

This forecasting process is almost impossible to perfect. To start with the government needs very accurate statistics about the economy to form plans from. It assumes planners know the best way to produce everything efficiently to produce the maximum possible output and does not take into account the many, many variables that will affect these.

As a result of how complicated the planning process is some choices are left to individuals. Workers still receive wages albeit the pay is poor, and with this money they can choose to purchase certain goods or services. Income that is received is of a small spread so there is in theory a parity of wages which leads to an equal dispersion of wealth unlike in market economies where the spread is much vaster between the mega rich and desperately poor, with