There are four main different types of economies: traditional economies, market economies, command economies, and mixed economies. Although each economy is unique, they all share overlapping features and characteristics.
Types of Economic Systems
Each type of economy is associated with a separate economic system. An economic system is a method by which resources are organised. At opposite ends of the spectrum are capitalism and communism.
A capitalist economic system revolves around wage labour and the private ownership of property, businesses, industry, and resources. Capitalists believe that, compared to private enterprises, governments do not use economic resources efficiently, so society would be better off with a privately-managed economy. Capitalism is associated with market economies and usually serves as the basis for mixed economies.
Communism, on the other hand, advocates for the public ownership of property and businesses. Communism extends beyond an economic system into an ideological system, in which the end goal is perfect equality and the dissolution of institutions- even a government. In order to transition to this end goal, communist governments centralise the means of production and completely eliminate (or heavily regulate) private businesses.
A related economic system, socialism, advocates for the social ownership of property and businesses. Socialists believe in the redistribution of wealth among all people in order to create equality, with the government serving as the arbiter of redistribution. Like a communist government, a socialist government will also take control of the means of production. Because they depend on centralisation, communism and socialism are both associated with command economies.
Economic Sectors
Economic sectors vary. This reflects the different economic processes that have affected a place over time. The four economic sectors are primary, secondary, tertiary and quaternary. The relative importance of these economic sectors changes based on each place’s level of development and role in their respective local and global economy.
The primary economic sector is based on the extraction of raw, natural resources. This includes mining and farming. Places such as Plympton, Dartmoor, and southwest England are characterised by the sector.
The secondary economic sectors are based on the manufacturing and processing of raw resources. This includes iron and steel processing or car manufacturing. The secondary sector has shaped places such as Scunthorpe, Sunderland, and northeast England.
The tertiary economic sector is the service sector and includes industries such as tourism and banking. The tertiary sector supports places such as Aylesbury and southeast England.
The quaternary economic sector deals with research and development (R&D), education, business, and consulting services. Examples are Cambridge and east England.
