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Global Regulation of Domestic Economic Activity & Wealth

Global Regulation of Domestic Economic Activity & Wealth
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  • 0:02 Domestic Regulation Systems
  • 1:21 Traditional System
  • 2:05 Market System
  • 3:20 Command System
  • 4:05 Mixed Economy System
  • 4:50 Lesson Summary
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Lesson Transcript
Instructor: Jessica Whittemore

Jessica has taught junior high history and college seminar courses. She has a master's degree in education.

This lesson will explain how different domestic economies are regulated. In doing this, it will explain traditional, market, command, and mixed economy systems as well as subsistence living and communism.

Domestic Regulation Systems

Different parts of the world have very different ideas of wealth and economic activity. For instance, some tribal villages measure wealth by how many cows one has, while the modern world ties wealth to numbers in a checkbook. In today's lesson, we'll discuss these differences as we tackle the topic of how domestic economies are regulated around the globe.

To begin our discussion, when we use the word 'domestic' in relation to global regulation, we're not talking about the idea of a home or a household. Instead, we mean existing inside a particular country. For instance, it is the domestic policy of the United States to use the dollar as currency, whereas it's the domestic policy of Japan to use the yen. For this reason, a simple way to summarize our lesson would be to say it will be a conversation on how different countries around the world choose to play out their economies.

When discussing this, economists usually break economic regulation into four different system types. They are traditional, market, command, and mixed. Of course, like most things that are easily separated on paper, we should probably mention that when it comes to real life, the lines between these systems can tend to get a bit blurred.

Traditional System

With this in mind, let's start with the traditional system. A traditional economic system is one in which the economy and distribution of resources are based on ritual, habit, and custom. In other words, it's one in which things have been done the same way for generation upon generation.

Great examples of this are many of the tribal communities of Eastern Africa which have practiced herding and agriculture for generation upon generation. Due to their reliance on ritual and habit, traditional economy systems tend to be very centered on the survival of the family rather than on the making of profits. With this in mind, many traditional economies remain at the subsistence level, or producing only enough to support one's self or one's family group.

Market System

Very different from traditional systems are market systems. A market system is one in which economic decisions, such as pricing and what to produce, are based on supply and demand. Unlike traditional regulation, market regulation is very concerned with making a profit. Probably one of the very best examples of the market system is the United States of America.

Even more personally, I am definitely a child of the market system. To explain, growing up my family owned a grocery store. Due to this, I have many memories of my dad studying receipts to see which products sold the best every week. In fact, all the products in our store were given an A, B, or C rating based on how well they sold. Now, when an A product was out of stock, you better believe my dad reordered it post-haste! He'd also raise the price a bit because he knew the demand for it was great. However, a C product usually wasn't reordered quite so quickly, and, often times, its price was lowered as a way to coax people into buying it. In other words, just like the domestic market system of the U.S., my dad's buying and selling decisions were based on supply and demand.

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