The economy is the institution that provides for the production and
distribution of goods and services, which people in every society need. Sometimes they can
provide these things for themselves, and sometimes they rely on others to provide them. When
people rely on others for goods or services, they must have something to exchange, such as
currency (in industrialized societies) or other goods or services (in nonindustrialized
societies). The customs surrounding exchange and distribution of good and services shape
societies in fundamental ways.
Economic Systems
The two dominant economic systems in the world are capitalism and socialism. Most
societies have varying blends of the two systems. Common hybrids of capitalism and socialism
are welfare capitalism and state capitalism.
Capitalism
Capitalism is a system under which resources and means of production are
privately owned, citizens are encouraged to seek profit for themselves, and success or failure
of an enterprise is determined by free-market competition.
Example: The United States is one of the most purely capitalistic societies in the world.
Most U.S. businesses are privately owned, but the government does regulate business
practices.
