There are in reality three, although some argue four, economic systems. They are
Traditional, Market, Command, or a variation of these called a mixed system. The
United States is in reality a mixed system moving toward a command system.
A traditional system is a subsistence type system concentrated primarily on food
and the necessities for life. Skills are handed down from person to person or family
to family. The distribution of wealth and possessions depends on the individual's
standing in society or on cultural customs.
A market system relies on the needs and wants of the consumer population. It is
governed by the laws of supply, demand and competition. This is the system commonly
referred to with the word Capitalism.
In a command economy the government owns and controls the wealth and resources,
distributing it among its citizens according to its dictates. This is usually referred
to as communism. Socialism is an offshoot of this type where some private wealth
and business is allowed with restrictions applied by government such as price and/or
Most economies are called mixed because they are some combination of the above
types. The most prosperous economies have leaned heavily toward the market system.
If one were to look back in history it would be discovered that the pilgrims tried
the command type of economy when they first landed at Plymouth. This was under a
contract which it was believed would bring about this great utopia. Free of outside
evil influences, greed and personal property were to be banished. Everyone was to
work for the common good, and altruism was to be its own reward. It did not work
out well. To quote Governor Bradford “The experience that was had in this common
course and condition, tried sundry years and that amongst godly and sober men, may
well evince the vanity of that conceit of Plato’s and other ancients applauded by
some of later times; that the taking away of property and bringing in community into
a commonwealth would make them happy and flourishing; as if they were wiser than
God. For this community (so far as it was) was found to breed much confusion and
discontent and retard much employment that would have been to their benefit and comfort.
For the young men, that were most able and fit for labour and service, did repine
that they should spend their time and strength to work for other men’s wives and
children without any recompense.” In other words it did not work. In fact it failed
with terrible consequences, during this experiment many people starved and true prosperity
was lacking. Those doing the most work resented those who took but did not work as
much (producers versus takers). Much like today where more than 47% of the people
do not fund the government and only about 20% of the people provide over 73% of the
funding. The only reason there is not starvation is the governments Command Economic
Principals, with massive government welfare programs, but eventually the government
runs out of other peoples money to support such programs.
In April of 1623 Governor Bradford abandoned the collective system and assigned
a plot of land to each family. They were permitted to keep everything they grew
or made and allowed to market what they did not consume themselves. How did this
work? To quote governor Bradford's summary “This had very good success, for it made
all hands very industrious, so as much more corn was planted than otherwise would
have been by any means the Governor or any other could use, and saved him a great
deal of trouble, and gave far better content.” In other words Capitalism worked while
collectivism (communism, socialism, fascism) did not.
We believe that a market system (capitalism) is the right economic model for this
country just as the founders did when they wrote the constitution. While a totally
free market system may sound good in theory, in practical terms there needs to be
some (but very limited) regulation. For example there needs to be regulation such
that one state can not individually tax another states products, to promote free
and fair interstate trade. There needs to be some regulation about harmful pollution
from an enterprise or state which effects health (such as regulation of waste treatment
or water systems).
Regulations however need to be minimal in their effect on commerce and minimal
in their effect on the market place. Unfortunately as we move ever closer to the
command style of economy the regulations are becoming more burdensome and expensive
with the effect of stifling free market economic principals. An example would be
the enormous effect EPA regulations are having on energy production and costs, with
no real benefit supported by true science. In fact some of the regulations contradict
each other so that if a business is in compliance with one regulation it is out of
compliance with another regulation.
Government should not be involved in trying to decide which businesses, ideas,
or resources are the best to invest in or support. The market will dictate which
are the best and which are the most efficient and economical, with the consumer leading
the way. For instance, the government deciding that there needs to be several blends
of gasoline and that ethanol must be added for some unproven benefit. The costs of
this to the consumer versus any benefit to society is heavily on the side of damaging
the consumer in not just the cost of the product, but damage to the engines of the
consumer, disruptions in fuel supply, higher food prices associated with those food
stuffs used to produce ethanol and public money wasted in support of an inefficient
fuel that can not sustain itself in the market place alone (ethanol).