welcome back we are in our last lecture video for chapter one we're gonna learn about economic systems so let's bring our notes back up economic systems okay so the fundamental questions every economy must face what things are going to be produced how will it be produced and how is it distributed for consumption those are three fundamental questions in economics at the end of the day every society whether it's the united states whether it's cuba whether it's angola whether it's djibouti whether it's eritrea whether it's i'm just trying to think of some esoteric countries san marino tuvalu vanuatu nauru palau the feminist states of micronesia yeah that's right i could name all the countries anyway so what every society must choose is what stuff is this society going to produce what goods is this society going to make and then beyond how is it going to get these goods like how is it going to do it is it going to do it through labor or more through capital um and then how are is it going to be distributed consumption again i've given health care analogy when i say distributed consumption with healthcare do we decide health together is going to be sold to the highest bidder which is largely how it's done in in the united states or is it going to be universally available for everybody which is done in most of the developed world so like how is that how are things can be distributed these fundamental questions uh are answered in in in the broadest sense by what we call an economic system an economic system is a basic blueprint for how these fundamental economic questions are answered the first economic system is called a traditional economy so think the u.s hundreds of years ago and think some parts of southeast asia sub-saharan africa south america that still largely operate as agrarian societies so traditional economy think agriculture what you produce is what you consume so think the most rural undeveloped parts of the world so what you produce is what you consume do you want a house a new house build it yourself do you want new clothes build it yourself do you want um beef slaughter that cow right that's a traditional economy where what you produce is what you consume okay so that's how these answers are these questions are answered what will be produced whatever the the people want how will produced however they can manage it how is it distributed what you make is what you get that is a that is the most traditional economy a command economy is a system where economic goals are passed down from a ruler or ruling class so north korea is the closest to a true command economy in the world today what is produced well whatever the government or bureaucracy decides should be produced how will be produced however the government thinks it should be produced that's your job that's your job that's your job that is how we're going to decide our economy is going to produce goods how's distributed well in a true communist sense maybe it's evenly distributed towards other maybe the ruling class gets more and peasants get less whatever it is it's up to the government that is a true command economy a market economy remember a market is an institution that brings together buyers and sellers and a market economy is an economy where economic decisions are decentralized meaning their government doesn't sign them resources are owned by individuals individuals own their labor own their capital which means like their money um and they produce what they want so what will be produced if somebody thinks they can make money producing something it will be produced how they produce whatever makes people the most money how is it distributed to the highest bidder that is a true market economy supply and demand sort of build up everything people get what they can afford and people produce whatever they think they can make money producing so you might think well that's us that's the u.s but that's not really true is it right because there are some things that truly are market-based like the market for hamburgers i think it's fair to say is a pretty free market you want a hamburger and you can afford it you can buy a hamburger but not everything is a free market social security is a command element right social security is not a market-based savings system it is a government-based saving system elements of our health care system medicare and medicaid that is a command economy even a municipal bus service right the me the bus service is run by the government right you don't what routes the bus takes isn't determined by the free market if it was then they would not run the bus to these rural parts of the city where not very many people are getting on and the bus is losing money by going there but the government says it's worth it because those people need the bus rides and so um the command elements of the us sort of determines where bus goes so we call the us and largely every economy in the world a mixed economy a mixed amount economy combines all these elements so the u.s of course is mostly a market economy but we have these command elements and we do have some traditional elements you know i grow tomatoes in my my site in my uh it's not really a yard it's more like a balcony we grow tomatoes out there um i don't always send my kids to a babysitter sometimes i send my kids to my their grandparents house these are traditional elements where child care is determined by the family where um are some of our food is grown by our family um and so there are some traditional economies traditional elements in the u.s economy though we are largely a market economy right 99.9 of the food i eat is bought from a free market just those tomatoes and our anaheim chilies and our basil and our cilantro cilantro you can't survive we can't keep cilantro alive um those we grow ourselves okay so the last slide here is uh looking at the the some of the economies of the world um by uh economic freedom sorry this isn't the last line but this is just something i think people find interesting so the most economic freedom right the us we think of we're number one the most free economy in the world that's absolutely not true if we look at the rankings singapore hong kong new zealand australia and switzerland rank as the top five the us comes in at 17. okay least economic freedom from 176 to the bottom the republic of the congo eritrea cuba venezuela and north korea those are the countries that have the least economic freedom or look most like a command economy whereas the most economic freedom those ones that look most like a true market economy though every economy has some command elements okay regulations rules the game so those certainly toward the market and the spectrum this is why i just said the us is best described as a mixed economy and i talked about this municipal bus systems furthermore markets in the united states are subject to significant regulation right and that's where these command elements come from there's regulations even in our free markets at a minimum regulations governments like protection property uh protecting property like protection property that doesn't sound right um like property protection protections against violent contract enforcement fraud protection think about like the usda uh uh and the uh uh that make sure our drugs are safe um and think about the food and drug administration keeping our our food and keep our food safe right we're going through this this onion recall right now right and in a true market economy no one's going to tell these stores to throw their onions away right but because we have regulations because if you eat an onion with salmonella is it salmonella in the onions i think so um that and the in the the grocery store knew that their onions were at risk you can sue the the grocery store for a lot of money right and so those are the command elements that help control and protect consumers okay and so the existence of the regulations kind of prove the fact that there's no such thing as a true 100 market economy though some economies and the us is one of them do you get pretty close okay so that is it with chapter one you've done it so now you have everything you need to need to go and take the quiz to do your assignment um and if you have any questions you can ask in the uh uh general course questions discussion board or of course you can always email me and i will see you again for a chapter two next week bye