ECONOMIC

INSTITUTIONS

PREPARED BY:
MS. SHERIFA ROSSLAINI O. KADIL, MPA
ECONOMY?
 ECONOMY
 Sociologists define economy more broadly as the social institution that
organizes the production, distribution, and consumption of a society’s goods and
services. Defined in this way, the economy touches us all.
 Hence, economy is not the same as government, which is the social institution
through which power is distributed and exercised. Economy and government are
social institutions that are certainly intertwined, but conceptually they are
distinct.
 An economy is a system of institutions and organizations that
either help facilitate or are directly involved in the production and
distribution of goods and services.
ORIGIN OF THE WORD “ECONOMICS”
The term economics comes from the Greek word
“oikonomos” which means household management.
 ECONOMICS
 It is the social science field which studies individual’s behavior and interactions
as economic agents and how economies work.
RESOURCES?
1. Human Resources
2. Natural Resources
3. Capital
4. Financial Resources
THREE SECTORS OF THE ECONOMY
Primary sector takes and uses Secondary sector of the Tertiary sector is the part of the
raw materials directly from the economy transforms raw economy that provides services
natural environment. materials into finished rather than products.
products and is essentially the
manufacturing industry.

Examples: agriculture, fishing, Examples: automobiles, clothing Examples: clerical work, health
forestry, and mining, farming & textiles, telecommunications, care, teaching, and information
construction, food industry, technology services, banking, IT,
utilities, financial, hospitality & leisure
 ECONOMIC INSTITUTION
Economic institutions emerged either informally through
repeated interactions between individuals and organizations
that establish expected norms of behavior or formally
specifically designed by the state or non-state agencies to do
a particular function.
 Economic institution could also
mean:
Specific agencies or foundations, both government and private, devoted to
collecting or studying economic data or commissioned with the job of supplying a
good or service that is important to the economy of a country.
Well-established arrangements and structures that are part of the culture or
society, e.g. competitive markets, the banking system, etc. are examples of
economic institutions.
WHAT IS THE FUNCTION & IMPORTANCE OF
ECONOMIC INSTITUTIONS?
 STATE INSTITUTIONS VS
NON-STATE INSTITUTIONS
 State institutions are institutions supported in whole or partly by the
government of the state.
 Examples: Bangko Sentral ng Pilipinas, National Economic
Development Authority, Philippine Statistics Authority, Department
of Tourism, Department of Finance, DENR, DPWH, DFA, DTI, and
many more!
 Non-State institutions or also called as non-state actors are
institutions defined as international actors who are completely
autonomous from the state. They are entities that participate and
act in international relations.
 Examples: Banks, Corporations, Cooperatives, Transnational
Advocacy Networks/ Groups, Developmental Agencies,
International Organizations and many more!
 Non-state institutions which help
promote the country’s economy:
 Banks
Cooperatives
Corporation
Labor/ Trade unions
LABOR FORCE

https://www.statista.com/statistics/578788/employment-by-econ
omic-sector-in-philippines/
THE NATURE OF WORK
1. Blue-collar work
2. White-collar work
3. Professional and managerial work
ECONOMIC SYSTEMS
It is a particular set of institutional arrangements and a
coordinating mechanism – to respond to the economizing
problem. It is the society that decides what goods to
produce, how to produce them and for whom goods will be
produced.
It is a set of economic institutions that provides economic
structure of a given economy.
 An economic system is a means by which societies or
governments organize and distribute available resources, services,
and goods across a geographic region or country.
 Economic systems regulate the factors of production, including
land, capital, labor, and physical resources.
 An economic system encompasses many institutions, agencies,
entities, decision-making processes, and patterns of consumption
that comprise the economic structure of a given community.
 TRADITIONAL COMMAND ECONOMIC
ECONOMIC SYSTEM SYSTEM

MARKET ECONOMIC MIXED ECONOMIC

SYSTEM SYSTEM
 TRADITIONAL ECONOMIC SYSTEM

 It is very basic and the ancient type of economic system

 It is primitive in nature; thus, highly sustainable & little wastage of resources
 It is based on goods, services and work
 It relies heavily on people and very little division of labor or specialization
 It still operates up until this day in rural settings in second and third world nations, where the
predominant economic activities include farming and other traditional income generating activities
 There are few resources that occur naturally and are restricted to access in some ways; thus, lack the
potential in generating surplus of goods
Market Economy Mixed Economy Command (Planned) Economy
(Capitalism) (Socialism) (Communism)
 COMMAND ECONOMIC SYSTEM
 There is a dominant centralized authority – government – that controls a significant portion of the economic
system.
 Also known as the “planned system” this economic system is common in communist societies since the
production and control is in the hands of the centralized government.
 The government comes in and exercises control over the resources. Ideally, centralized control covers valuable
resources such as gold or oil. The people regulate other less important sectors of the economy, such as
agriculture.
 In theory, the command system works very well as long as the central authority exercises control with the
general population’s best interests in mind. However, that rarely seems to be the case.
 Command economies are rigid compared to other systems. They react slowly to change because power is
centralized. That makes them vulnerable to economic crises or emergencies, as they cannot quickly adjust to
changing conditions.
 MARKET ECONOMIC SYSTEM

 It is based on the concept of “free markets” where there is little to no government intervention in the
production of goods & other products; thus, the government does have little control over the
resources & does not interfere in the important segments of the society
 The regulation comes from the people and the relationship between the supply and demand
 From a theoretical point of view, a market economy facilitates substantial growth. Arguably, growth
is highest under a market economic system.
 A market economy’s greatest downside is that it allows private entities to amass a lot of economic
power, particularly those who own resources of great value. The distribution of resources is not
equitable because those who succeed economically control most of them.
 MIXED ECONOMIC SYSTEM
 There is a combined characteristics of a command and market economic systems. Also called as dual
systems.
 It is sometimes used to describe a market system that is under a strict regulation of the government.
 This economic system is widely used in most Western states.
 Most industries are private, while the rest , composed primarily of public services, are under the
control of the government.
 Mixed systems are the norm globally. Supposedly, a mixed system combines the best features of
market and command systems. However, practically speaking, mixed economies face the challenge of
finding the right balance between free markets and government control. Governments tend to exert
much more control than is necessary.
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